Theory of Market Structure

Running head: THEORY OF MARKET STRUCTURE
Theory of Market Structure
Name of the Student
Name of the University
Author Note

THEORY OF MARKET STRUCTURE1
Executive Summary
This report is pertaining to the structures of market according to the theory of micro
economics. It discussed the different types of structures that exist in a market. The discussed
market structures are perfect competition, oligopoly, monopolistic market and monopolistic
competition. The paragraph in the report provided the insights of the said market structure
mechanisms and their equilibrium in short run and long run equilibrium. The main focus has
been given to Tenaga Nasional Berhad the largest and the only electric company in Malaysia.
The market structure it is in, that is monopolistic market has been discussed in the context of
the company and the how the company functions in the short run and long run and how its
equilibrium is achieved in different time frame has also been thoroughly explained.

THEORY OF MARKET STRUCTURE2
Table of Contents
Introduction................................................................................................................................3
Market Structure.........................................................................................................................3
Perfectly Competitive Market................................................................................................4
Oligopoly Market...................................................................................................................5
Monopolistic Market..............................................................................................................5
Monopolistic Competition Market.........................................................................................6
Tenaga Nasional Berhad............................................................................................................6
Short run Equilibrium............................................................................................................7
Long run Equilibrium.............................................................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

THEORY OF MARKET STRUCTURE3
Introduction
Theory of microeconomics explains different types of market structure and
categorizes it into three major structures that are perfectly competitive market, monopoly
market and oligopoly market. The profitability, number of firms, type of product that means
homogeneous or heterogeneous and its uniqueness decides the structure of the market. Hence,
the report discusses characteristics of all the three market structures and explains the
equilibrium conditions and profitability terms. In order to get a broader understanding of the
theory a Malaysian company is considered in this report. The name of the company is Tenaga
Nasional Berhad, which is an electricity company in Malaysia. In the following sections, the
description of the company will be given and the type of market structure it fits is explained
along. The reasons behind the market structure it is in, is discussed by pointing out its
influence over the market and the product it offers. The possible situations that gave rise to
the market structure of Tenaga Nasional Berhad have been explained. The discussion has also
been extended to the short run and long run equilibrium of the company and the process how
the company achieves such equilibrium. Hence, the aim of the report is to focus on all the
existing structure of the market with all and apply the understanding to find the market
structure of the selected electrical company and discuss its market structure in detail with its
equilibrium conditions and sustainability.
Market Structure
The different firms with different products sell their product in a market. However, as
far as the products offered by the firms are completely different from each other such that
they do not even target same customer base then there will no competition among the firms.
Now, if there are numerous firms offering similar products targeting same customer base then
the firms are considered to be operating in perfectly competitive market (Pindyck &