Perfectly competitive market A perfectly competitive market according to Liozu, 2013 is a general market where competition is at its highest level. Economists that are neoclassical suggest that perfect competition produces the best results for the society and the consumers. Perfect knowledge characterizes perfect competition: this is where knowledge is freely offered to all the participants, there are no time lags or failure of the information in its flow. This means that the entrepreneur's role is limited and the risks to are minimal. Given that these consumers and the producers both have a perfect knowledge it's then assumed that they make rational decisions that maximize their self-interest, the producers maximize profits while the consumers
Existence of few sellers - Few sellers dominate the entire industry and influence the prices of each other greatly thus controlling the market. b. Restrictions in entry – In an oligopolistic market businesses cannot easily enter the market. Its dominated by the existing merchants/businessmen which creates imperfect competition. Restriction or barriers are lesser than monopolistic market.
It can only be operated by bigger companies and every companies have different goals to achieve. These examples can be classified as oligopolies because it has limited amount of firms in the industry. Besides, it is most power held by few bigger firms, it offers differentiated goals and it has low barriers of
Imperfect Competition: In this type of market, there are large number of sellers and they all sell different products. This is a market situation, the suppliers sell dissimilar products in comparison to the perfect market situation where there are identical products being sold by different sellers. Perfect competition- Perfect competition is a market where there is a large number of buyers and sellers buying and selling identical products without any restrictions on their entry and exit and having perfect knowledge of the market at the same time. Examples of product in perfect competition market are agriculture goods, such as vegetable, fruits and others. Monopoly: The word monopoly is a Latin word.
In monopolistic competition, the industry consists of many firms competing each other, and each firm practices product differentiation with a product that is slightly different from the products of competing firms. Firms are free to enter and exit the industry. The product differentiation enables firms to compete on product quality, price and marketing. To stay in the industry for a considerable period, the firm must maximize its profit. Because of product differentiation, a firm in monopolistic competition faces a downward-sloping demand curve.
It is extremely difficult for any new Company wanting to enter into an Oligopoly market structure. One of the main barriers is the initial investment or start-up costs, any person wanting to start a company will either have to be financial stable, or have a collateral to request a loan from a Financial
A perfect competition, an oligopoly or a monopoly. A perfect competition is when a market is easy to enter and has multiple competitors who all have a chance at being successful in the market. Markets for commodities are often in perfect competition as those are products that everyone needs and that are easy to supply. Those markets also face price competition, meaning that their way of standing out from everyone else is to have a lower price than the other competitors. This leads to consumer based pricing.
Besides this, monopolist tend to produce good in the small quantity and charge in high price; which results in deadweight loss and eventually decrease social surplus or total surplus. 3. Monopolistic Competition This kind of industry stands in the middle between the perfect competition and monopoly. It has many buyers and sellers producing slightly different products which can be easily substituted. Benefits Diversities of goods and services are out there for consumers to choice, which can produce positive consumers’ surplus.
Competition delivers better outcomes than monopolistic ones and even in the cases where the competition policy provides some monopolistic rights at the same time it provides safeguards to ensure that those rights will not be used abusively. The UK Government it its White Paper Productivity and Enterprise: A world Class Competition Regime stated that “Vigorous competition between firms is the lifeblood of strong and effective markets. Competition helps consumers get a good deal. It encourages firms to innovate by reducing slack, putting downward pressure on costs and providing incentives for the efficient organization of production”
For example, the automotive industry, electrical equipment industry, and canning industry in the United States are controlled by several companies. The appearance of the oligopolistic market is mainly attributed to three reasons. First, due to the economies of scale, that is, manufacturers continue to expand production scale, and the market is relatively small. The second reason is due to the barriers to entry. The government grants monopoly power to certain enterprises in the industry through laws and regulations, and at the same time, it imposes certain controls on it