Ideally, a market is a place where two or more parties are involved in buying and selling. The people involved in marketing are the buyer and the seller. The seller earns money as a buyer purchases the products. There has to be more than one buyer and seller for the market to be competitive. There are different types of market structures that can characterize a country’s economy. There are four basic types of market structures:
Perfect competition describes a market structure, where a large number of small firms compete against each other. This market structure is a theoretical model that does not exist in the real world and is instead used as a benchmark to measure other types of markets.
The monopolistic competition also refers to a market structure, where a large number of small firms compete against each other. However, this market structure will no longer result in a socially optimal level of output, because the firms have more power and can influence market prices to a certain degree.
Oligopoly describes a market structure which is dominated by only a small number firms.
Monopoly refers to a market structure where a single firm controls the entire market.