Revision: Forms of Market Eco HSC Commerce (English Medium) 12th Standard Board Exam Maharashtra State Board

The term ‘market’ refers to the whole region in which buyers and sellers are in close contact to effect the purchase and sale of a product.

In economics, the term market refers to the mechanism or arrangement by which buyers and sellers of a commodity are able to interact with each other for having economic exchange and are able to strike a deal about the price and the quantity to be bought and sold.

“A market is the set of all actual and potential buyers of a product.”, Phillip Kotler

“Market includes both place and region in which buyers and sellers are in free competition with one another.”, Pyle

“A market means a body of persons who are in intimate business relations and carry on extensive transactions in any commodity.”, Jevons

“A market is a centre in which forces leading to exchanges of title to a particular product operate and towards which and from which the actual goods tend to travel.”, Clark and Clark

An oligopoly is a market structure in which a small number of large firms dominate the industry. These firms sell similar or differentiated products, and each firm’s decisions (such as pricing or output) directly affect the others, making them interdependent.

According to Augustin Cournot, “Economists understand the term 'market', not any particular marketplace in which things are bought and sold, but the whole of any region in which buyers and sellers are in such close contact with one another that the prices of the same goods tend to equality easily and quickly.”

• 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

• "A pure monopoly exists when there is only one producer in a market, there are no direct competitors." – Ferguson
• "Monopoly is a market situation in which there is a single seller, there is no close substitute for commodity it produces, there are barriers to entry." – Koutsoyiannis

Monopsony is a market structure in which a single buyer (monopsonist) purchases the entire supply of a particular product or factor service, faces many sellers, and the entry of other buyers is very difficult or impossible.

• “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

"Monopolistic Competition is found in the industry where there is a large number of small sellers, selling differentiated but close substitute products." – J.S. Bain

• In common language, a market is a place where buying and selling occur.
• In economics, a market is any arrangement that allows buyers and sellers to meet (physically or virtually), decide a price, and exchange a commodity or service.​
• A market can be local, national, or international.
• Essential elements of a market: commodity, buyers and sellers, area of operation, communication/contact, and price.​
• There are two main ways to define a market: geographical (place‑based) and functional (activity‑based).​
• Competition among buyers and sellers tends to produce one prevailing price for the same commodity at the same time within a market.​

• Markets can be classified on the basis of competition among sellers into perfect competition and imperfect competition.
• Perfect competition is an ideal market with many firms, identical products, free entry/exit, and no control over price by individual firms.
• Imperfect competition includes real‑world markets where products are differentiated and firms have some control over price (monopoly, monopolistic competition, oligopoly).
• In practice, most real‑life markets show imperfect competition, not perfect competition.

• 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.

• Price under perfect competition is determined by the interaction of market demand and market supply.
• Equilibrium price is the price at which quantity demanded equals quantity supplied; equilibrium quantity is the corresponding quantity.
• At prices above equilibrium, there is excess supply and price tends to fall.
• At prices below equilibrium, there is excess demand and the price tends to rise.
• Marshall compared demand and supply to the two blades of a pair of scissors; both are essential for price determination.
• In perfect competition, the industry determines the price, and each firm is a price taker and must accept that price.

• 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.​

• Monopoly is a market structure with one seller, no close substitutes, and barriers to entry.
• Main features: single seller, no close substitutes, barriers to entry, price maker, firm = industry, and possible price discrimination.
• Types include private, public, legal, natural, simple, discriminating, and voluntary (cartel) monopolies.
• Under monopoly, AR is the market demand curve; MR lies below AR because price must fall to sell more.
• Equilibrium output is found where MC=MR; price is taken from the AR curve at that output and is usually above MC.
• Cost curves (FC, AFC, AVC, AC, MC) have the usual shapes, but MC is not the supply curve in a monopoly.
• Price discrimination allows a monopolist to charge different prices by person, place, time, or use.

• Monopsony: one buyer, many sellers; buyer has market power.
• Monopsonist: the single powerful buyer.
• Main features: single buyer, many sellers, specialised input, low mobility of suppliers, buyer is price-maker.
• Common in labour markets (single large employer in a region; government as large employer).
• Joan Robinson is closely linked with the analysis of monopsony and imperfect competition.

• 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.

• Sellers compete mainly through product features and branding, not by price alone.
• No single seller can dominate the market or set global prices.
• Customers benefit from choice but may pay more for features created through branding.