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UNIT - 8

UNIT - 8. MARKET ANALYSIS. MARKET. A market is a system by which buyers and sellers bargain for the price of a product, settle the price and transact their business – buy and sell a product. Personal contact between the sellers and buyers is not necessary. Characteristics of Market.

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UNIT - 8

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  1. UNIT - 8 MARKET ANALYSIS

  2. MARKET A market is a system by which buyers and sellers bargain for the price of a product, settle the price and transact their business – buy and sell a product. Personal contact between the sellers and buyers is not necessary.

  3. Characteristics of Market • THE NUMBER AND SIZE DISRIBUTION OF SELLERS • THE NUMBER AND SIZE DISTRIBUTION OF BUYERS • PRODUCT DIFFERENTIATION • CONDITION OF ENTRY AND EXIT

  4. Market situation Perfect competition Imperfect competition Monopoly Monopolistic, oligopoly, duopoly, bilateral monopoly, monopsony, duopsony, oloigopsony.

  5. Perfect competition • Existence of very large number of buyers and sellers • Homogenous product • Free entry and free exit of firm • Existence of single price • Perfect knowledge of market • Full and unrestricted competition • No government intervention • Normal profit

  6. Price – output determination under perfect condition

  7. EQUILIBRIUM OF COMPETITIVE FIRM IN THE SHORT – RUN : • SUPER NORMAL PROFIT • NORMAL PROFIT • LOSS

  8. MONOPOLY • Anti-thesis of competition • Existence of single seller • Absence of substitute • Control over supply • Price maker • Entry barriers

  9. Firm and industry is same • Existence of super normal profit

  10. CAUSES OF MONOPOLY • Government may grant a license to any particular person or a particular group for operating public utilities like Railways. • Producers may possesses certain rare raw material or patent right or secret methods of production. • The necessities of having huge investment or large scale of production.

  11. PRICE – OUTPUT DETERMINATION IN SHORT- RUN • Super normal profit • Normal profit • loss IN LONG - RUN • Super normal profit

  12. PRICE DISCRIMINATION Price discrimination means selling the same or slightly differentiated product to different sections of consumers at different prices. When consumers are discriminated in regard to prices charged from them. It is called price discrimination.

  13. Kinds of price discrimination • Discrimination of the first degree • Discrimination of the second degree • Discrimination of the third degree

  14. BASIS OF PRICE DISCRIMINATION • Personal differences • Place • Different uses of the same commodity (consumption of lighting) • Time • Distance • Special orders • Nature of product • Quantity of purchase

  15. Geographical area • Special classification of consumers • Age • Preference or brands • Sex • Peak and off season

  16. MONOPOLISTIC COMPETITION • Existence of a large number of firm • Free entry & exit of firm. • Element of competition • Non-price competition • Preference to consumers • Product differentiation

  17. PRICE – OUTPUT DETERMINATION IN SHORT- RUN • Super normal profit • Normal profit • loss IN LONG - RUN • Normal profit

  18. OLIGOPOLY COMPETITION • Interdependence • Conflicting attitude of firm • Element of competition • Price rigidity • Aggressive or defensive marketing methods • Constant struggle • Small number of large firm

  19. PRICE – OUTPUT DETERMINATION • Independent pricing • Pricing under collusion • Price leadership Kinked demand curve (Sweezy’s model) It does not deal with price & output determination. Once a price quantity determined, an oligopoly firm does not find it profitable to change its price even if there is a change in cost of production.

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