Characteristics of Different Market Types

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In economics, a market is any place where sellers and buyers can get together to exchange goods, services and information. There are four basic types of markets: monopoly, oligopoly, perfect competition and monopolistic competition. Perfect examples of these four basic types are hard to find due to their specifications and assumptions. However, the industries or firms closest to each of these will be discussed further to get an idea about the characteristics of each market type. Textile industry in Pakistan can be taken up as a good example of perfect competition. There are a large number of producers and a large number of buyers within the market. According to the All Pakistan Textile Mills Association (2012), there are a total of 396 textile mills in Pakistan. A vast number of lawn producing companies have emerged and the prices have been set according to the demand in the market. These firms are price takers as a great number of competitors exist within the market. The prices and quality of these products are known and, hence, there is perfect knowledge within the market. There are relatively low barriers to entry and exit and a great deal of support by the government of Pakistan. The products have a relatively elastic demand because of the large number of competitors that exist. If one firm tends to increase its prices, its demand will fall and people will resort to other firms for the same product. Due to perfect knowledge within the market, the maximum profits that
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