To identify structural features, read the evidence for four things. These are how many sellers there are and how similar their products are. The others are how easy it is to enter the market and how much control sellers have over price.
This appears at the start of most market structure questions. Every later answer depends on it.
It builds on firms, costs and scale and leads into the study route for market structures.
What are the four features, and what evidence points to each?
Number of sellers. Look for counts or phrases such as “dozens of stalls” or “the only operator”.
Product similarity. Words such as “identical”, “interchangeable” or “each brand has its own recipe” matter here.
Ease of entry. Look for licences, large start-up cost, a long-term contract or a patent, which make entry harder. “Anyone can start” points the other way.
Control over price. Look at what happens when a seller changes price. If buyers walk away easily, control is limited.
A fifth clue is information: whether buyers can compare prices easily. Use it when the case mentions it.
How do you turn evidence into a statement?
Use a three-part sentence: evidence, feature, meaning. For example: “The case says there are 40 stalls selling almost identical corn (evidence), so there are many sellers of a very similar product (feature). One stall therefore has little control over price (meaning).”
Worked example
Read this fictional case.
Kelapa Ria is a coconut water seller in the town of Tanjung Sari. Eleven other stalls sell coconut water within the same street, all at about RM3.50 a cup. Customers rarely mind which stall they use. A stall needs a street permit costing RM60 a year. Last month Kelapa Ria raised its price to RM4.00 and sold 70 cups a day instead of 120.
Step 1, sellers: twelve in total (Kelapa Ria and eleven others).
Step 2, product: customers “rarely mind which stall”, so products are very similar.
Step 3, entry: a permit of RM60 a year is a small cost, so entry is easy.
Step 4, price control: a rise from RM3.50 to RM4.00 is about 14%, and daily sales fell from 120 to 70, a drop of about 42%. Sales fell by far more than price rose, so control over price is very limited.
Statement: The evidence suggests many sellers of a near-identical product, easy entry and very little control over price.
The mistake to watch for
A common slip is to use the single largest number as the whole story.
Mistaken answer: “Kelapa Ria sold 120 cups a day, so it is the dominant seller and has market power.”
The student read the sales figure and ignored that eleven rivals sell the same product at the same price.
The correction is to check all four features before you decide. One number rarely settles a structure.
Check yourself
1. A case says: “Rimba Telecom is the only firm licensed to run the island’s phone network. Building a rival network would cost RM900 million.” Name two features and the evidence for each.
Show answer
Number of sellers: only one licensed firm. Entry: a rival network would cost RM900 million and needs a licence, so entry is very difficult. Both suggest a sole seller with strong protection from newcomers.
2. A case says: “Seven bakeries sell loaves of similar size and quality. Bakery Kasih raised its price by RM0.20 and lost a third of its customers.” What does the evidence suggest about price control?
Show answer
Control is limited. A small rise in price caused a large loss of customers, which suggests buyers can switch easily to similar loaves from other bakeries.
3. True or false: “A firm with 60% of the sales in a market must be a monopoly.” Explain briefly.
Show answer
False as a general rule. A 60% share is large, but other sellers hold the other 40%. You would need evidence about close substitutes, entry and price control before using the word monopoly.
Where this leads next
Once you can pick the right evidence, move to explaining a competitive pressure on a fictional firm. Then test yourself with the market structures practice set.
Many students know the four features but lose marks by not quoting the case. In online one-to-one Economics tuition, a teacher can mark your answers and train you to quote the evidence every time.