what are the factors of market structure?
Answers
Answer:
Some of the major factors which determines the market structure of an industry are as follows:
Market structure refers to number and type of firms operating in the industry. Economists have used different ways to classify the markets in order to study the nature of different kinds of markets and problems faced by each of them.
Explanation:
The main factors, which determine the market structure, are:
1. Number of Buyers and Sellers:
Number of buyers and sellers of a commodity in the market indicates the influence exercised by them on the price of the commodity. In case of large number of buyers and sellers, an individual buyer or seller is not in the position to influence the price of the commodity. However, if there is a single seller of a commodity, then such a seller exercises great control over the price.
2. Nature of the Commodity:
If the commodity is of homogeneous nature, i.e. identical in all respects, then it is sold at a uniform price. However, if the commodity is of differentiated nature (like different brands of toothpaste), then it may be sold at different prices. Again, if the commodity has no close substitutes (like Railways), then the seller can charge higher price from the buyers.
3. Freedom of Movement of Firms:
ADVERTISEMENTS:
If there is freedom of entry and exit of firms, then price will be stable in the market. However, if there are restrictions on entry of new firms and exit of old firms, then a firm can influence the price as it has no fear of competition from other or new firms.
4. Knowledge of Market Conditions:
If buyers and sellers have perfect knowledge about the market conditions, then a uniform price prevails in the market. However, in case of imperfect knowledge, sellers are in a position to charge different prices.
5. Mobility of Goods and Factors of Production:
When the factors of production can move freely from one place to another, then a uniform price prevails in the market. However, in case of immobility of goods and factors, different prices may prevail in the market.
Answer:
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