Competition and market structure

Economists use market structure to describe the interactions of a group of firms producing or selling the same or similar products to certain consumers. On the one hand, market structure discerns the scope of an industry that is made up of competing firms. On the other hand, it measures the degree to which these firms interact and compete with each other for acquiring consumers in a market whose boundary is demarcated. While firm numbers are not the only characteristic to classify market structures, they readily suggest that firm interaction and competition could intensify when more and more firms enter the market. Despite the fact that firm numbers and the intensity of interaction are not always positively correlated, examining this relationship is useful for people to approach market structure intuitively. Perfect competition is the most restrictive market structure due to a number of assumptions that are imposed on firms.