The importance of Market Structures in the economy


Market models provide a model with which to compare the characteristics of real markets.

The Characteristics:

- Perfect Competition which is a market with many competitors and a standardized product.

- Monopoly's which are companies that control a market with high barrier of entry.

-Monopolistic competition which is a market with many different competitors  and products that consumers can choose from

- Oligopoly's which are markets that have few competitors participating in them that sell standardized or differentiated products.

- Demand and Profit Maximization Which is when perfect profit is achieved.

To learn more about the characteristics, click the button below.

Perfect Competition

Important Characteristics:

  • No barriers of entry
  • Each unit of input, such as units of labor, are also homogeneous.
  • Firms produce homogeneous, identical, units of output that are not branded.
  • There are a very large numbers of firms in the market.
  • Information is free and available for everyone.

Advantages - This market competition model is very consumer friendly and is filled with product information so the consumer is never mislead.

Disadvantages - No scope for economies. Also all the products are unique. Lack of supernormal profits may mean the investment of Research and Development(R&D) is unlikely. Important for industries like pharmaceuticals.

Click to Learn more about Perfect Competition,


Important Characteristics:

  • High Barrier of entry
  • Single Supplier controls product output in the market.
  • Unique Product
  • Specialized information

Advantages - Monopolies allow for high research and development and the increased output would lead to a high level of production. Also monopolies tend to be successful and stable companies.

Disadvantages - No consumer control over price and poor level of service. Lack of competition leads to low quality, high priced products.

Example: Herff Jones is the only company that provides class rings, they also provide graduation garments.

Click to Learn more about Monopolies,


Important Characteristics:

  • Different barriers of entry
  • Small number of firms
  • Both Identical and Differentiated Products.

Advantages - Large firms have strong holds over market, but consumers still have say over prices. Product evolution is also still apart of oligopolies in order to beat rivals.   

Disadvantages - Setting of prices is somewhat determinable. Firms always have to consider their rivals and new creative ideas tend to fail. (Nintendo)

Examples: Coke and Pepsi control the soda market.

Click to Learn more about oligopolies,  

Monopolistic Competition

Important Characteristics:

  • Product differentiation.
  • Many firms.
  • No entry and exit cost in the long run.
  • Independent decision making.
  • Some degree of market power.
  • Buyers and Sellers do not have perfect information (Imperfect Information)

Advantages - No significant barriers of entry so you can jump in and out. The different products also provide the consumer with much variety in their products, they are more efficient then monopolies

Disadvantages - Same differentiation does not create utility but creates unnecessary waste from extra packaging. There is a lot of inefficiency compared to other markets.

Example : Hotels and Pubs, General Specialist Retailing.

Click to Learn more about Monopolistic competition,  


Comment Stream

2 years ago

The notable thing is the use of the button elements. The information is spot on to the average, but is boosted due to the button links.

2 years ago

Interesting how you gave short definitions of the structures before going over each separately, gives the reader background knowledge before just jumping in. I also like the sources being at the end, but also throughout where relevant.

2 years ago

I liked the pictures! & the buttons were implemented nicely.

2 years ago

You have a lot of good information but some of your pictures weren't as relevant as they could have been. Overall, your Website is really informative.

2 years ago

I love the monopoly picture. I like the information you provided. Next time try to hyperlink text to your sources instead of pasting the whole URL, your sources section looks ugly.

2 years ago

I really like your example for monopolistic competition.