1. Market Structure The concept of market structure simply relates to how much market power or control a particular firm has in affecting the level of market prices.

2. Market Structure There are basically 4 market structures in an open economy in Economics.

3. Market Structure – Pure Competition Definition: Pure competition exists when there are many buyers and rival sellers competing strongly. Pure competition implies that firms are price takers, potential competitors can easily enter and exit the market, there is perfect knowledge of relevant conditions in the market by buyers and sellers to allow them to make rational decisions and so on. Features of a purely competitive or perfectly competitive market: Many sellers in the industry Strong competition No product differentiation Ease of entry and exit Firms are ‘price takers’ and have little market power.

4. Market Structure – Monopolistic Competition Definition: Monopolistic competition is a market where there are many firms producing products that are in some way differentiated from each other. Features of monopolistic competition market: Many sellers in the industry Some product differentiation Moderate ease of entry and exit How do they compete and get you to buy their products? Advertisement – techniques, spread knowledge of products, imply a need for the product. Distribution channels – flood the market Customer loyalty programs Build up a reputation of higher quality.

5. Market Structure – Oligopoly Definition: Oligopoly exists where several large firms (2 – 5) control the output of a product for which there is no close substitute. A market with only 2 main firms is known as a dupopoly. Features of an oligopoly market: Several sellers in the industry Some product differentiation Fairly difficult entry and exit – substantial barriers to entry Collusion may exist in the market with firms deciding to act together rather than engage in genuine competition.

6. Market Structure – Pure Monopoly Definition: Pure monopoly exists when a single firm controls the output of a particular market. That firm is a price maker and competition is weak. Features of an pure monopoly market: One seller in the industry Weak competition Product differentiation unimportant Entry and exit difficult Firm is a ‘price maker’ and has a lot of market power. Examples: