Market Structure

• Market structure


  Describes the key traits of a market: the number of sellers, types of products they sell, barrier of entry into and exit from the market
• Market structure


  Explains the power of a firm to determine its product's market price and its strategies to win the market share and hence to maximize profit
• Models of market structure

  • Perfect competition
  • Monopoly
  • Monopolistic competition
  • Oligopoly
• Perfect competition


  • Many firms (sellers) selling homogeneous products and easy market entry and exit
  • Firms are the price taker
• Characteristics of perfect competition

  • Easy entry and exit
  • Many sellers
  • Homogeneous product
  • Price taker
• Monopoly


  • Market has only one seller who has exclusive right to sell that unique product
  • Very difficult or expensive to enter and exit the market
• Monopolistic competition


  • Many sellers
  • Products sold are differentiated
  • Relatively easy entry and exit
• Monopolistic competition


  • Shampoo
  • Toothpaste
  • Cosmetics and body care products
• Oligopoly


  • Few large producers who sell either homogeneous or differentiated products
  • Difficult to enter because requires huge amount of capital and cost
• Oligopoly


  • Aircraft
  • Breakfast cereal
  • Mobile service provider
• Islam permits profits because it promotes trades as an occupation and regards profits as bounty from Allah
• Islam approves the freedom of enterprise by putting no ceiling on profit
• Islam also is not averse to competition
• Allah asked believers to excel in this world and in the Hereafter by engaging in all lawful activities in pursuing material gain
• Believers are advised to be moderate in getting profit in trade, which advocates for ultimate honesty in business dealings
• Islam does not allow false praise, gambling, speculation and interest in economic dealing