“In a hypothetical market of mobile phones, the brand AWAAZ was lead

1.	“In a hypothetical market of mobile phones, the brand AWAAZ was leading the market share. Its nearest competitor VAARTA suddenly changed its strategy by bringing in a new model of the mobile phone at a relatively lesser price. In response, AWAAZ too slashed its price.” Based on the above information, identify the form of market represented and discuss any three features of the market.
Answer» The form of market represented in the given paragraph is oligopoly. Following are the three features of oligopoly : 1. Few firms – Few firms mean either only a few firms in number or a few big firms producing most of the output of the industry. The exact number of firms is not defined. The word ‘few’ signifies that the number of firms is manageable enough to make a guess of the likely reactions of rival by a firm. 2. Barriers to the entry of firms – The main reason why the number of firms is small is that there are barrieres which prevent entry of firms into industry. Patents, large capital, control over the crucial raw materials etc., prevent new firms from entering into industry. Only those who are able to cross these barriers are able to enter. 3. Non-price competition – Firms try to avoid price competition for the fear of price war. They use other methods like advertising, better services to customers, etc. to compete with each other.

“In a hypothetical market of mobile phones, the brand AWAAZ was leading the market share. Its nearest competitor VAARTA suddenly changed its strategy by bringing in a new model of the mobile phone at a relatively lesser price. In response, AWAAZ too slashed its price.” Based on the above information, identify the form of market represented and discuss any three features of the market.

Answer»

The form of market represented in the given paragraph is oligopoly.

Following are the three features of oligopoly :

1. Few firms – Few firms mean either only a few firms in number or a few big firms producing most of the output of the industry. The exact number of firms is not defined. The word ‘few’ signifies that the number of firms is manageable enough to make a guess of the likely reactions of rival by a firm.

2. Barriers to the entry of firms – The main reason why the number of firms is small is that there are barrieres which prevent entry of firms into industry. Patents, large capital, control over the crucial raw materials etc., prevent new firms from entering into industry. Only those who are able to cross these barriers are able to enter.

3. Non-price competition – Firms try to avoid price competition for the fear of price war. They use other methods like advertising, better services to customers, etc. to compete with each other.

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