Market Structures

Question 1

What is a market

Answer 1

A market is any agreement, system or organization which brings buyers and sellers of a good and service in close contact for the purpose of buying and selling or for transacting business

Question 2

Types of market

Answer 2

Consumer goods market
Labour market
Money market-short term loans
Capital market -long term
Stock exchange market
Foreign exchange market

Question 3

What is perfect market

Answer 3

Perfect market is a a market structure in which prices are determined by the forces of demand and supply

Question 4

Features of perfect market are?

Answer 4

There are homogeneous commodities
There are large number of buyers and sellers
There is uniformity of prices
There is free entry and exit
There is no preferential treatment
No transportation cost
Perfect knowledge of market transactions

Question 5

Advantages of perfect market

Answer 5

1. Large number of buyers and sellers which makes it difficult for any buyer or seller go to influence price thereby helping to increase efficiency
2. Each producer/seller is price taker .there is only 1 ruling market price making it difficult for price to be changed.
3. Freedom of entry and exit of producer/seller
4. no preferential treatment

Question 6

Disadvantages of perfect market

Answer 6

1. Waste of resources..resources are underutilised

2. Possibility of unemployment/underemployment of labour and other factors of production

Question 7

What is an imperfect market?

Answer 7

Imperfect market is a market in which the forces of demand and supply do not freely operate

Question 8

Types of imperfect market

Answer 8

Monopolistic competition: There is only one seller of a particular commodity
Oligopoly
Duopoly