Solution:

Market Structure:

• In general, a market means a place where there are many buyers and sellers of different products who are actively engaged in buying and selling acts. The firm's demand curve is expected to depend on such things as the number of sellers in the market and the similarity of their products.

• These are the aspects of market structure that may be termed as the characteristics of the market of generalization that are likely to influence a firm's behavior and performance.

  

• In a broader sense face to face contact between buyers and sellers are not necessary.

• They can establish contact through different means of communication like letters, agents, telegraphs, telephone, etc., or newspapers.

• Thus, the term market does not mean any particular place but the entire area where buyers and sellers of a commodity are in such close contact with each other that the price of the same commodity tends to be one throughout that area.

The objective of Market Structure:

• Market Structure influences how a firm behaves in pricing, supply, the barrier of entry, efficiency, competition.

  • It enables an organization to control its market plan.

• Market Structure helps in strategic decision making.

• Market Structure aligns the organization to the changing environment.

• Market Structure is important and it affects market outcomes through its impact on motivation, opportunities & decision of economic factors.

• Based on the above-mentioned definition following characteristics can be brought out:

1- Area:

• The market does not mean any particular place where buyers and sellers meet, rather, it means the entire area within which buyers and sellers are spread and have close contact with each other. For example, Bata Shoes has a market all over India., because its buyers and sellers are found in every city and state.

2- Buyers & Sellers:

• For exchange, at least one buyer and one seller are needed. Thus, the existence of buyers and sellers is a must. If one of the two does not exist in a region, it does not satisfy the function of the market. Buyers and sellers don't need to be physically present to exchange or transact the things. They can come in contact through correspondence.

3- One Commodity:

• For the existence of the market, there must be one commodity like wheat, sugar, ghee, vegetables, and utensils. Thus they can be termed as the wheat market, the sugar market, ghee market, vegetable market, and utensils market respectively.

4- Free Competition:

• There must be healthy and free competition among the buyers and sellers. Thus in practice, there should not be any restrictions on them. There must be free competition.

5- One Price:

• Generally, it is remarked that in a market one price prevails which is the main feature and testimony of a market.