Price determination under different market forms:
For our daily use we buy commodity or service, like automobile, telecommunication, and grocery, or education, hospital survice. Anyone know how the price fixed for this type of product?
Ok in economy we will see 4 type of market.
- Perfect competition market
- Monopoly market
- Monopolistic market
- Oligopoly market
Let us discuses one by one
- Perfect competition market (PCM): PCM is a market where there are many buyer and many seller in the market and the buyer and seller have perfect knowledge to the market. there are no entry and exit in the market .the product is homogeneous .all the seller is selling a same product. so the product is identical , there is no extra cost , like finance cost or transportation, government taxes ect.but the main feature of this competition is larger number of buyers and seller , so you have many buyer and seller . This type marker exit only in theory and practice it doesn’t exit. The best example is the market grocery or food grain. this is a market were people have very high number of buyer and seller in the market ,so this is almost like the perfect competition
- Monopoly: it is opposite to PCM in PCM you have many seller in the market, but in monopoly as the word say mono means one poly means seller. So there is one seller, they may be many number of Bayer but the seller is one.
Railway and diffence is one of the best example private entriprunal is not allowed to get entre to the national defence. So this were the example there was one seller only one manufacture. You wound get many example of this nature in India because creation of monopoly is illegal. You can’t create monopoly. If you are into the business were you have monopoly the government will buy or shut down and it self-run the business because you are not allude to do business
- Monopolistic competition: this is almost similar to PCM and does we play near to PCM here in the case there are enurmarole number of buyer and seller. the only difference is in the PCM the product is homogeneous all the goods are same which are sold in the market in monopolistic competition the product are not homogenies are identical there are of similar nature for ex we have toothpaste manufacture the manufacture of tooth paste is monopolistic competition . Generally the toothpaste are similar but all the toothpaste is difference in some are other manner. There is some difference between tooth past two brand but the product ultimately remain almost similar. So this is an example of monopolistic market.
- Oligopoly : oli means few and poly means seller so in an oligopoly the market you have few seller however there is no restriction in the number of buyer so this is again a case you have decrees . the number of seller generally is raise between 2 to 10 seller.
Just to give an example in oligopoly market you have cell phone, telecommunication phone provider. The price and output decision decision of one firm affects the similar decision of the other firms .There are not many service provider you can count in a finger some in the case of tyre, aeroplane ect. So there are few seller in the market, yet the are many buyer in the market this is a general various competition and some example
Author : Marutesh S