There are four market structures that industries fall into.It is important for managements to know which one their organization competes in.

Why?

Well, the type has an effect on price elasticity and other competitive factors.Ignore these as a manager and you may end up on the street of the firm might go bust.

Starting from the most competitive going to the least they are:

Pure Competition - What is this?Well, it is an industry where there are thousands of buyers and sellers.The exact number is not important, what is important, is the fact the NO buyer of seller is large enough to influence the market price.For example, you are a wheat farmer and you have a great crop that you ship to Chicago, what price will you get?You will get that day=s price at the Chicago Mercantile Exchange.What if it is too low and you keep your wheat?Nothing happens, you are such a small supplier, relative to the market, that if you take your wheat home the price does not change.You must accept the market price which makes you a >price taker=.