Market Structures: key terms, formulas and examples
Markets set prices through supply and demand. Structures run from perfect competition to monopoly, and externalities or public goods are where markets alone fall short.
Example
With one bakery in town, it has the power to raise prices.
Takeaway
Ask how many sellers exist and how easily new ones can enter.
Key terms
- Supply and demand
- The interaction that sets market prices.
- Monopoly
- One seller controls the whole market.
- Oligopoly
- A few large firms dominate a market.
- Perfect competition
- Many sellers offering identical products, so none can set the price.
- Externality
- A cost or benefit that lands on people outside the deal.
- Public good
- A good everyone can use and nobody can be excluded from.
- Price floor
- A legal minimum price.
- Natural monopoly
- A market best served by one firm because of high costs.
- Market equilibrium
- The point where supply equals demand.
Formulas
Master Market Structures in a game
Quizzes, a CEO simulator, a real estate tycoon game and startup tools. Free to start, in 7 languages.
Play BizJourney free →