MARKET “A market is an area over which buyers and sellers negotiate for the exchange of a well defined commodity”

MARKET Essentials of a Market  A well defined commodity which is bought and sold  Presence of buyers and sellers  A place where commodity is to be brought and sold  Direct competition between buyers and sellers

Market Markets can be classified on different basis i.e: (a) According to period of time (b) According to location (c) According to nature of commodity (d) According to nature of competition

MARKET Markets according to Competition Competition means the conditions or the environment prevailing in the market under discussion. Competition means the conditions or the environment prevailing in the market under discussion.

Market Perfect competition Imperfect competition Monopoly Monopolistic Oligopoly

PERFECT COMPETITION Characteristics (1) Very large number of buyers & sellers In a perfectly competitive market the number of buyers and sellers is very large; so large that an individual buyer or an individual sellers can not effect the market price. In a perfectly competitive market the number of buyers and sellers is very large; so large that an individual buyer or an individual sellers can not effect the market price.

PERFECT COMPETITION (2) Perfect substitutes  Products of all firms are perfect substitutes of each other  Homogenous products  Preference can be given only on the basis of price

PERFECT COMPETITION (3) No attachment or association  Consumes have no attachment/association with the product of a particular firm  If violated, then the existence of more than one price in the market will be possible.

PERFECT COMPETITION (4) Perfect mobility  Perfect mobility of factors of production geographically and among occupations  No restriction on entry and exit of firms

PERFECT COMPETITION (5) Perfect knowledge  Buyers have perfect knowledge of the price prevailing in the market  No producer can charge any other price but the the market price  Only one price can prevail in the market  A firm in perfect competition is therefore a price taker.

REVENUE CURVES Total revenue Total revenue Total revenue is the total amount of sale proceeds or the total receipts of the firm. Total revenue is the total amount of sale proceeds or the total receipts of the firm. If a firm producing cloth sells one hundred meters of cloth in the market at Rs. 50 per meter, the sale proceeds or the receipts of the firm will be Rs (total revenue). If a firm producing cloth sells one hundred meters of cloth in the market at Rs. 50 per meter, the sale proceeds or the receipts of the firm will be Rs (total revenue).

REVENUE CURVES TR = Price * Quantity sold P * Q P * Q TR= 50 * 100 = 5000 Rs. TR denoted total revenue P denotes price Q means quantity sold in the market

REVENUE CURVES Marginal revenue Marginal revenue is the addition made to total revenue by a one unit increase in the volume of sales by the firm. For example, if a firm sells 100 meters of cloth at Rs. 50 per meter, TR= 5000 Rs. If it increases its volume of sales from 100 to 101 i.e. by one meter, the total revenue will be 5050 Rs. and the marginal revenue will be 50 Rs. Marginal revenue is the addition made to total revenue by a one unit increase in the volume of sales by the firm. For example, if a firm sells 100 meters of cloth at Rs. 50 per meter, TR= 5000 Rs. If it increases its volume of sales from 100 to 101 i.e. by one meter, the total revenue will be 5050 Rs. and the marginal revenue will be 50 Rs.