The concept of market structures
A market is a place or situation where goods and services are exchanged between producers and consumers. In a market, exchange may take place with or without the use of money.
In economics, a market does not only mean a particular physical location but also means the interaction between buyers and sellers i.e. the interaction of the forces of demand and supply.
The term market structure refers to aspects of market organisation and management which influence the performance and behavior of a firm. Markets are therefore classified basing on the following aspects:
- Number of firms ( sellers) in the industry.
- Nature of the product i.e. homogeneous or heterogeneous products.
- Freedom of entry and exit into and from the market or industry.
- The level of advertisement.
- Availability of information about the existing market conditions.
- The degree or extent of collusion
- The number of buyers or consumers in the market.
According to the above criteria, the following types of market structure exist namely:
- Perfect competition.
- Monopoly
- Monopolistic competition
- Oligopoly
- Duopoly.