Slide 1

Market Structures

Group 8

The Four Types of Market Structure

Tap water

Cable TV

Monopoly

Novels

Movies

Monopolistic

Competition

Tennis balls

Crude oil

Oligopoly

Number of Firms?

Perfect

Wheat

Milk

Competition

Type of Products?

Identical

products

Differentiated

products

One

firm

Few

firms

Many

firms

MONOPOLISTIC COMPETITION

Many firms sell similar but not identical products.

Major Sectors

Monopolistic competition is commonly found in many field in retail, service and manufacturing industries.

Examples of retail:- clothe stores, electrical appliances, etc.

Service Industry:- restaurants, beauty saloons, health clubs, etc.

Manufacturing:- shoes, garments, cosmetics, furniture manufacturing , etc.

26-4

5

Characteristics & Examples of Monopolistic Competition

Characteristics:

Many sellers

Product differentiation

Free entry and exit

Large number of buyers

0

5

5

Monopolistic Competition

Many Sellers

There are many firms competing for the same group of customers.

Product examples include books, CDs, movies, computer games, restaurants, piano lessons, cookies, furniture, etc.

Monopolistic Competition

Product Differentiation

Each firm produces a product that is at least slightly different from those of other firms.

Rather than being a price taker, each firm faces a downward-sloping demand curve.

Monopolistic Competition

Free Entry or Exit

Firms can enter or exit the market without restriction.

Monopolistic Competition

Large number of buyers:

Unlike perfect competition, here buying is by choice and not by chance