Forms of Market — Economics STD 12 Commerce / Arts — Question

1. It is a market situation in which there are large number of buyers and large number of sellers selling homogeneous product.
2. Products are perfect substitute for another as they are identical.
3. Uniform price prevails in the whole market. There is no selling cost.
4. Firms are price takers. Thus the firm has a horizontal demand curve.
5. It is an unrealistic market.

Monopolistic Competition:

1. It is a market situation in which there are many buyers and many sellers selling differentiated products.
2. Products are similar but not identical. They are close substitutes.
3. Individual price policy is followed and huge selling cost is incurred on sales promotions.
4. The firms are price makers. Thus the firms have a downward sloping demand curve.
5. It is a realistic market.