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MARKETS AND MARKET STRUCTURES

Economics is concerned with the production and consumption of goods and services. We already know that. We also know that the transfer of goods and services from producers to consumers  is achieved through exchange, often involving the consumers to offer money for the products they receive. This process is carried out through markets. Thus we can define:
Markets - Markets are mediums that allow buyers and sellers of a specific good or service to interact with each other in order to facilitate exchange. 

However, markets come in very different shapes and forms. In economics, the term market structure refers to the nature and degree of competition in the market for goods and services. The structures of market both for goods market and service (factor) market are determined by the nature of competition prevailing in a particular market.
There a four different types:
1. Monopolistic competition, a type of imperfect competition such that many producers sell products or services that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other. This market structure exists when there are multiple sellers who are attempting to seem different than each other.
2. Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share.
  • Duopoly, a special case of an oligopoly with two firms.
  • Monopsony, when there is only a single buyer in a market.
  • Oligopsony, a market where many sellers can be present but meet only a few buyers.
3. Monopoly, where there is only one provider of a product or service.
  • Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms.
4. Perfect competition, a theoretical market structure that features low barriers to entry, identical products with no differentiation, an unlimited number of producers and consumers. It is studied solely for the purpose of helping us understand how the economy works and how competitive behaviour works (or might work, when there are no regulations).

The concerns of oligopolies and oligopsonies

In the situation of few sellers or few buyers the influence power of the providers/consumers is too large because of the fact that they have much bigger market share. Thus these markets are prone to price fixing. Generally, the fewer the sellers the greater the price(because some competition still exists) and the fewer the buyers the lower the price.
The next post will be about demand and supply and we will see how the price fluctuates when they do.
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