BY: SYED IZHAR SHAH

 An imperfect market is one in which there is

not full disclosure, or in which there are
barriers to entry or exit or perhaps some form
of manipulation.
 First, industries tend to have fewer sellers
when there are significant economies of large
scale production and decreasing costs.

 Second, market tend towards imperfect

competition when there are barriers to entry
that make difficult for new competitor to
enter an industry.
 Bigger firms have cost advantage due to..
 Technology
 Cost structure

 When economies of scale prevail, one or few

companies produce most of the industry’s
output. The industry then becomes
imperfectly competitive.
 Single monopolist will dominate the industry.
 Perfect competition is a market structure
where many firms offer a homogeneous
product. Because there is freedom of entry
and exit and perfect information, firms will
make normal profits and prices will be kept
low by competitive pressures.
In perfectly completive (a)
Total industry demand DD is so
vast relative to the efficient
scale of a single seller that the
market allows viable
coexistence of numerous
perfect competitors.
 It is a market structure in which a small
number of firms has the large majority of
market share.
 Two or more firm dominate the market
 In Oligoply Cost turn up at
higher level of output relative
to total industry DD.
Coexistence numerous
perfect competitors is
impossible, and oligopoly will
emerge
 A Natural Monopoly, in which
the industry's sources of market
imperfections.
 When costs fall
rabidly and
indefinitely, as in the
case of natural
monopoly in (c), one
firm can expand to
monopolize the
industry
 Barrier to entry are factor that make it hard
for new firms to enter an industry.
 When Barriers are high , an industry may
have few firms and limited pressure to
compete,
 Legal restrictions
 High cost of entry
 Advertising and product
Differentiation.
 Government restrict competition in certain
industries important legal restriction include
patents, entry restrictions, and foreign trade
tariffs and quotas.
 In addition to legally imposed barriers to
entry There are economic barriers as well.
 In some industries the price of entry simply
may be very high. take the commercial
aircraft industry.
 It is possible for companies to create barriers
to entry for potential rivals by using
advertisement and product differentiation.
 Advertisement can create product awareness
and loyalty to well known brands.
 Product differentiation can impose a barriers
to entry to increase the market power of
producers in many industries.