The market economy has a complex structure, includes many production, financial, commercial and information components that interact with each other on the basis of legal norms of doing business.
The market, in itself, is an organized structure, which includes producers and consumers selling and buying goods and services. As a result of such interaction between the parties, market prices are set and optimal needs for sales volumes are developed.
The structure of the market depends, first of all, on the number of sellers and consumers who participate in the commodity-money exchange. Their relationships determine the nature of the correlation in the supply and demand market and give rise to different market models.
The essence of the market is manifested mainly through the concept of competition. It is the center of gravity in the market economy system . Market competition plays the role of an accelerator of processes and stimulates a better supply of goods to markets. The main market models and their characteristics are given below.
The following main market models are distinguished.
The market of perfect competition (polypoly). With a large number of independent producers of one kind of goods and the mass of individual consumers of goods, the market structure is such that consumers are able to buy goods from any manufacturers, based on personal preferences. Manufacturers, in turn, have the opportunity to sell the goods to any buyer, based on their benefits. In this situation, consumers do not have a special share in total demand.
In a polypoly, changes in the prices of one seller cause a reaction only among buyers, and not other sellers. With this market model, it is open to all, the price is a given value, so participants are forced to accept it.
Perfect competition is determined by such prerequisites: the inability of individual sellers and buyers to seriously influence the situation on the market, the absence of barriers for new players to enter the market, the absence of price, demand and supply restrictions, free access to information on the main characteristics of the market.
Market imperfect competition (oligopoly). Such a market is characterized by a very large number of consumers and a rather limited number of manufacturers, which even individually can satisfy a significant share of total demand.
In the situation of the marginal structure of this market, when a single mass of manufacturers confronts a huge mass of consumers, the market turns into a monopoly. With such a market model as a monopoly, one seller also acts as a producer of a product that does not have substitute goods. Due to this, the monopolist gains market power and the ability to fully control prices.
If a fairly large number of manufacturers coexist on the market and are ready to supply diverse products, then it is called the market of monopolistic competition.
Monopolistic competition as a market model is characterized by a large number of manufacturers of similar, but not identical products. Since there is product differentiation, firms enter into a struggle with each other through prices, as well as with the help of even greater differentiation of goods. Monopolistic competition is characterized by the heterogeneity of goods on the market, the lack of complete transparency of the market, and the desire of manufacturers to individualize their products.
A special type of imperfect competition (monopsony). This market is characterized by the presence of a single consumer and a large number of independent producers. The consumer can purchase the entire volume of the offered goods supplied by all manufacturers working on the market.
The relationship between producers and buyers, when a single seller corresponds to a single consumer, are called a bilateral monopoly and, in fact, are not market (competitive) ties at all.