Differentiating Between Market Structures
Not every industry is exactly the same. They have characteristics that set them apart from each other. The interconnected characteristics of a market are known as the market structure. Industries are put into categories based on what is produced, how it is produced, and who is going to buy it once it is produced. The market structure is the structure of these categories. There are four basic types of market structures; perfect competition, monopolistic competition, oligopoly, and monopoly (Hubbard, 2010).
A perfect competition market must have buyers and sellers and must be producing the same things; farmers are an example of a perfect competition. A monopolistic competition market sells a differentiated product; examples of this market structure are restaurants and clothing stores. An oligopoly is a market structure where a small number of manufacturers compete; an example of an oligopoly market is manufacturing computers. The fourth and final market structure is the monopoly market. This is a rare business that is selling something unique, like the United States Postal Service is a monopoly.
Goods can be considered rival, excludable, non-rival or non-excludable. Rival goods are goods that only one person can consume while excludable goods are goods that if a person does not pay for it they are unable to consume that good. Non-Rival goods are when any one person consuming a good does not matter in regards to another person consuming that good. Non-excludable goods are just the opposite of excludable goods. One cannot be excluded from the good even if they do not pay for it (Hubbard, 2010).
Public goods can be considered non-rival and non-excludable. Public goods can be things such as police or firemen. These are goods that if one person consumes them it does not affect someone else consuming it and public goods are also goods that if they are not paid for anyone can still consume the good. Private...