Ámbitos de la gestión docente

There are three criteria for categorizing markets. These criteria are as follows;

a) Degree of Competition b) Volume of trade c) Commodity traded 3.2 Degree of Competition

Competitions in economics are conditions that are present in markets where buyers and sellers interact to establish prices and exchange goods and services. Economic competition is the means whereby the self-interest of buyers and sellers acts to serve the needs of society as well as those of individual market participants. Society is served when the maximum number of goods is produced at the least possible prices.

Under the degree of competition, there are two main types of markets;

 Perfect markets

 Imperfect markets 3.2.1 Perfect Markets

The essential features of a perfect market are;

(a) Homogeneous Commodity

35

Any one unit of the commodity brought to the market is exactly like any other. There is no trade name or trade mark to distinguish the supply of one seller from that of another. It is of no consequence then from which seller a buyer makes his purchases.

For example, if garri is offered for sale, all the sellers will be selling garri. If it is white yam, all the sellers would be selling white yam.

(b) Many Buyers and Sellers

A large number of buyers and sellers would make it impossible for a few buyers and sellers to significantly influence the market demand, supply and prices either by curtailing purchases and supply respectively.

Apart from being many, the many buyers and sellers must be on the average small firms. The significance of a large number of small firms and many buyers is that the power to influence the behaviour of the participants in the market is thoroughly dispersed. In other words, no single person or business has the power to dictate the terms on which the exchange of goods and services takes place (unlike the situation in a monopoly or oligopoly). Market results then are truly impersonal.

(c) Buyers and Sellers must be in Close Touch

Buyers and sellers should have complete knowledge of transactions within the market. This is necessary so that they could be immediately aware of what is happening in any part of the market.

This is possible through the following means;

 Buyers and sellers to be present together in the same place.

 Modern methods of communication, such as telephones, postal services, and internet facilities can easily bring buyers and sellers into easy contact with one another in spite of the distance between them.

(d) Preferential Treatment

In a perfect market, there must not be any preferential treatment of favoured customers or buyers and sellers.

(e) Free Entry and Exit into the Market

36

Buyers and sellers should be free to enter and leave the market. There should be no unionism of any kind that will hinder or limit the extent of entry and exit.

(f) Portability of Commodity

Commodity in a perfect market should be capable of being easily transported from one part of the market to another.

3.2.2 Imperfect Markets

Any deviation from those conditions that make a perfect market makes the market an imperfect one.

Therefore, under imperfect markets the following features are discernable;

(i) Non-homogeneous Commodity

The same type of a commodity may be branded under different names or may be differentiated on the basis of further processing. For example, in the garri market, yellow garri is different from white garri while USA brand of rice is not the same as Golden brand of rice to an average house wife and Elephant cement is different from Dangote cement to a bricklayer.

(ii) Entry and Exit

Entry into imperfect market is not free. A prospective seller must join an existing association before he or she can be allowed to entry the market while buyers may be compelled to buy from particular sellers. For example, farmers‘ wives who bring the produce from their husbands‘ farms to the market cannot sell directly to the final consumers in most markets. They have to sell first to some designated middlemen who will eventually distribute to the retailers and the wholesalers before the final consumers can get the commodity to buy.

(iii) Preferential Treatment

Sellers in imperfect markets treat buyers differently since market information is hoarded. Sellers charge differential prices depending on who they are selling to.

3.2.3 Cases of Imperfect Markets

37 The following are cases of imperfect markets (a) Monopoly:

In a monopolistic market, two conditions must be fulfilled:

 There is only one seller selling the commodity or the few sellers combine together to fix supply and price of the commodity.

 There is no substitute for the commodity.

(b) Oligopoly

In an oligopoly market;

 There are a few sellers and many buyers.

 It is called duopoly when there are just two sellers.

 Duopoly is thus a special case of oligopoly.