Economic system in market economy

equilibrium price and quantity (Qs=Qd)

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Unit 4 Economic system in market economy.ppt

In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services, with or without money, is a transaction.

There are four basic types of market structures: perfect competition, imperfect competition, oligopoly, and monopoly. ... Meanwhile, monopolistic competition refers to a market structure, where a large number of small firms compete against each other with differentiated products.

The theory of price, or price theory, is a microeconomic principle that uses the concept of supply and demand to determine the appropriate price point for a good or service. ... The concept allows for price adjustments as market conditions change. For example, suppose that market forces determine that a widget costs $5.

Historical development of theory
Historically, the best-known proponent of such theories is probably Adam Smith. Piero Sraffa, in his introduction to the first volume of the "Collected Works of David Ricardo", referred to Smith's "adding-up" theory. Smith contrasted natural prices with market price.

A set up where two or more parties engage in exchange of goods, services and information is called a market. Ideally a market is a place where two or more parties are involved in buying and selling.
The two parties involved in a transaction are called seller and buyer.
The seller sells goods and services to the buyer in exchange of money. There has to be more than one buyer and seller for the market to be competitive.
Monopoly - Monopoly is a condition where there is a single seller and many buyers at the market place. In such a condition, the seller has a monopoly with no competition from others and has complete control over the products and services.
In a monopoly market, the seller decides the price of the product or service and can change it on his own.
Monopsony - A market form where there are many sellers but a single buyer is called monopsony. In such a set up, since there is a single buyer against many sellers; the buyer can exert his control on the sellers. The buyer in such a form has an upper edge over the sellers.

Supply (Seller) Demand (Buyer)	1	2	Many (a lot of)	Lots of (More than)
1	Monopoly (bilateral)	Duopoly monopsony	Oligopoly monopsony	Perfect monopsony
2	Monopoly duopsony	Duopoly (bilateral)	Oligopoly duopsony	Perfect duopsony
Many (a lot of)	Monopoly oligopsony	Duopoly Oligopsony	Oligopoly (bilateral)	Perfect oligopsony
Lots of (More than)	Perfect monopoly	Perfect duopoly	Perfect oligopoly	Pure and perfect competition

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