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Market Structure

The interconnected characteristics of a market, such as the number and relative strength of the buyers and sellers, degree of collusion among them, level and forms of competition, extent of product differentiation and ease of entry and exit in the market describes the Market Structure.
The structure of the market refers to the number of firms in the market, their market shares, and other features which affect the level of competition. Market Structures are distinguished mainly by the level of competition that exists between the firms operating in the market. Hence Market Structures are classified in terms of presence or absence of competition. When competition is absent the market is said to be concentrated.
In Economics, Markets are classified according to the structure of the industry serving the market. Industry structure is categorised on the basis of Market Structure Variables which is believed to determine the extent and characteristics of competition
Those variables which have received the most attention are, number of buyers and sellers, extent of product substituatability, costs, ease of entry & exit, and the extent of mutual interdependence.
In the traditional framework, these structural variables are distilled into the following taxonomy of Market Structures.
Perfect Competition, in which the market consists of a very large number of firms producing homogeneous products.
Monopolistic Competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share.
Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share.
Monopoly, where there is only one provider of a product or service.
Oligopsony, a market dominated by many sellers and few buyers.
Monopsony, When there is only one buyer in the market.
The main criteria by which one can distinguish between different market structures are the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely.
Market Structure is important as it affects the market outcomes through it's impact on the motivations, opportunities and decisions of economic actors participating in the market.
The goal of economic market structure analysis is to isolate & study each of this effect in an attempt to explain and predict market outcomes.

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The Intuitive Lowest Cost Method

The Intuitive Lowest Cost Method Or The Minimum Cell Cost Method

The Intuitive Lowest Cost Method is a cost based approach to finding an initial solution to a transportation problem.
It makes allocations starting with the lowest shipping costs and moving in ascending order to satisfy the demands and supplies of all sources and destinations.

This straightforward approach uses the following steps.
Identify the cell with the lowest cost.Allocate as many units as possible to that cell without exceeding the supply or demand.Then cross out the row or column or both that is exhausted by the above assignment.Move on to the next lowest cost cell and allocate the remaining units.Repeat the above steps as long as all the demands and supplies are not satisfied. 
When we use the Intuitive Approach to the Bengal Plumbing problem, we obtain the solution as below.

Transportation Matrix for Bengal Plumbing From \ To Warehouse E Warehouse F Warehouse G Factory Capacity Plant A Rs.50
Rs.40 100 Rs.30 100 Plant…

Vogel's Approximation Method (VAM)

The Vogel's Approximation Method

In addition to the North West Corner and Intuitive Lowest Cost Methods for setting an initial solution to transportation problems, we can use another important technique - Vogel's Approximation Method (VAM).
Though VAM is not quite as simple as Northwest Corner approach, but it facilitates a very good initial solution, one that is often the optimal solution.
Vogel's Approximation Method tackles the problem of finding a good initial solution by taking into account the costs associated with each alternative route, which is something that Northwest Corner Rule did not do.

To apply VAM, we must first compute for each row and column the penalty faced if the second best route is selected instead of the least cost route.

To illustrate the same, we will look at the Bengal Plumbing transportation problem.

Transportation Matrix for Bengal Plumbing From \ To Warehouse E Warehouse F Warehouse G Factory Capacity Plant A
Rs.30 100 Plant B


A market in any one of a variety of different systems, institutions, procedures, social relations or infrastructures whereby persons trade, and goods and services are exchanged, forming part of the economy. It is an arrangement that allows buyers and sellers to exchange things. Markets vary in size, range, geographical scale, locations, types and varieties of human communities, as well as in the types of goods and services traded. Some Examples include, local farmer's market held in town squares, Shopping Centres or shopping malls, Financial Markets such as International currencies or commodity markets or Equity stock markets, legally centred markets such as pollution permits, and illegal markets such as black markets for illicit drugs or weapons. In mainstream economics, the concept of market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is called a transaction. Thus a market ha…