Question

what criteria are used to identify markets? what js the difference between an industry and a market? for each of the following industries, state what market structure characterizes the industry and justify why you think it is that market structure: a) corn on the cob , b ) soft drink manufacturers, c) Dentists, d) cable television , e) Pizza

answer with your own word ( 200 words )

Answer 1

Markets are identified by the following criteria-

• Nature of the product- Homogenous (similar) or heterogeneous(different)
• Barriers to entry and exit of a firm
• Number of firms
• Consumer preferences of a product

There are four types of markets-

• Perfect Competition- Similar products, no barriers to entry and exit, a large number of firms, no consumer preference
• Imperfect competition- Different products, no barriers to entry and exit, a large number of firms, consumer preference
• Monopoly - Product dominating the market, high barriers to entry and exit, single seller, consumer have no choice
• Oligopoly- The nature of the product is the same(the background), barriers to entry and exit, consumers can have preferences

The major difference between an industry and a market is - industries are made up of producers and markets are made up of consumers. Industries are formed by producers producing goods and markets are created by the demand of consumers for goods and services.

The market structure the following goods belong to are-

a) Corn on the Cob-

It will come under perfect competition because corn on the cob is a common product (similar product) which is sold by various other sellers. Consumers will not have a particular preference as to from where they should buy it because there are multiple sellers of this similar product.

b) Soft Drink Manufacturers-

This is the case of oligopoly. There are a few numbers of firms indulged in manufacturing soft drinks but they are large in size. Other firms who want to enter this market will have to face some barriers to entry. Also, the companies set the price according to their profits. Example- CocaCola, Pepsi, Limca, etc.

c) Dentists-

This comes under imperfect competition. There are various dentists in a city, offering different quality of services. Consumers have the preference of dentists on several factors.  There are no barriers to entry as such. Any other dentist can join the market at any given time.

d) Cable Television-

It is the case of an oligopoly. There are few big firms in this market of cable television focused on maximizing their profit. Other firms who want to enter this market will have to face some barriers to entry

e) Pizza-

It comes under imperfect competition. There are various pizza outlets. Each pizza outlet offer variety to its consumer. The pizzas are a differentiated product. A customer can make a preference over pizza.