Describe the different market forms

The benchmark market structure that underpins most economic analysis is perfect competition. In this market, there are many buyers and sellers and a homogeneous good. Therefore, no single buyer or seller has power to influence market price. In this case, buyers and sellers are said to be price-takers.

As the number of buyers or sellers reduce, the market becomes less competitive. In a oligopoly market, there are a limited number of sellers, and therefore, each has the power to influence market price. In the extreme case, there is a single buyer who serves the entire market. This type of market is called a monopoly. Sustainable profit is possible in both oligopoly market and monopoly, because in this market, sellers are shielded from competition that will drive profit to zero in a competitive market.