Revision: Introductory Microeconomics >> Forms of Market and Price Determination Economics Commerce (English Medium) Class 11 CBSE

• According to Mrs Joan Robinson, "Perfect competition prevails when the demand for the output of each producer is perfectly elastic."
• "Perfect competition is characterised by the presence of many firms. All of them sell identical products. The seller is the price taker." – Bilas
• "Perfect competition prevails when the demand for the output of each producer is perfectly elastic." – Mrs Joan Robinson
• "Perfect competition describes a market in which there is a complete absence of direct competition among economic groups." – Ferguson

"If a market is not organised, if contact between buyers and sellers is established with great difficulty and they are not in a position to compare the goods and the prices paid, then we face a situation of imperfect competition." — Fairchild

Monopsony refers to a situation in which there is a single buyer of a commodity and in which the entry into the market by other buyers is impossible.

Monopolistic competition is a market structure in which the number of firms is large, there is free entry and exit of firms, and the firms produce differentiated products.

Product differentiation refers to differentiating the products on the basis of brand, size, color, shape, etc.

According to Chamberlin, “A General class of product is differentiated if any sufficient basis exists for distinguishing the goods of one dealer from those of another. Such a basis may be real so long as it is of importance whatsoever to buyers and leads to a preference for any variety of the product over another”.

An oligopoly is a market structure in which there are only a few big sellers.

Perfect competition is a form of market in which there are a large number of buyers and sellers and a homogeneous product is sold at a uniform price.

When a firm is able to sell the same product or service to two different categories of consumers at different prices, then it is known as price discrimination. Generally, a Monopoly firm is able to practice price discrimination successfully.

The act of selling the same product at different prices to different buyers is known as price discrimination.

A monopoly is a market situation in which a single firm sells a commodity, and there is no close substitute for the commodity the monopolist sells.

• “Oligopoly is that situation in which a firm bases its market policy in part on the expected behaviour of a few close rivals.”
  — J. Stigler
• “An oligopoly is a market of only a few sellers, offering either homogeneous or differentiated products. There are so few sellers that they recognise their mutual dependence.” — P.C. Dooley

• "Elasticity of supply is defined as the percentage change in quantity supplied by percentage change in price." – Prof. Bilas
• "Elasticity of supply is the ratio of percentage change in 'quantity supplied over the percentage change in price." – Lipsey

\[e_s=\frac{\text{Proportionate Change in Quantity Supplied}}{\text{Proportionate Change in Price}}\]

Where:

• e_s: Elasticity of supply
• Δq: Change in quantity supplied
• ΔP: Change in price
• q: Original quantity supplied
• p: Original price

• Price effect depends on the size and direction of shifts in both demand and supply.
• Quantity usually moves in the direction of both curves (↑ if both rise, ↓ if both fall).
• Use diagrams to show shifts.
• Always check which change (demand or supply) is bigger to predict the final outcome.

• Perfect competition is an ideal market where many buyers and sellers trade identical products, and no one can control price.
• Firms and buyers are price takers; the price is fixed by industry demand and supply.
• Pure competition needs 3 conditions (large numbers, homogeneous product, free entry/exit).
• Perfect competition needs 7 conditions (3 basic + perfect knowledge, factor mobility, no selling costs, no transport costs).
• The model is used as a benchmark to judge how efficient other markets are.

• Imperfect competition is more common in the real world than perfect competition.
• It occurs when at least one condition of perfect competition fails (e.g., product differentiation, entry barriers, imperfect information).
• It includes monopoly, monopolistic competition, oligopoly, and duopoly as major forms.
• Firms often have some power to set prices, unlike in perfect competition, where firms are price takers.​

• Oligopoly: A market with a few dominant firms, high interdependence, and barriers to entry.
• Firms compete both by price and by non‑price methods (advertising, quality, branding).
• Price rigidity and non‑price competition are typical features of oligopolistic markets.

• Price ceiling helps buyers (causes shortage).
• Price floor helps sellers (causes surplus).
• Both disrupt market equilibrium.
• Rationing and black markets often follow government controls.

• Firms are assumed to mainly aim at profit maximisation.
• Economic profit = TR − TC.
• Normal profit is the minimum reward needed to keep a firm in the industry and is part of the cost.
• Pure (economic/supernormal) profit is the extra over and above all costs, including normal profit.
• Under the TR–TC approach, profit is maximum where the TR–TC gap is the largest.

• Shows total quantity supplied by all producers at different prices.
• Market supply = sum of individual supplies (A + B + C).
• Higher price → higher market supply.
• Market supply curve slopes upward, showing direct relationship.