Grade 8A Economics
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Case Studies based Question
Perfect competition is one type of market structure with a number of distinctive characteristics. It is often compared favourably with monopoly.
- Discuss whether pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly.
Last date for Submission:
March 10rd, 2014
Please Write Your Response in 500 Words
Note:
1. Write with references.
2. Market evidences in support of your reasons.
3. Marks allocation for this article is 20
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks [Use Harvard referencing style]
C. Use of Key words. 5 Marks
D. Examples from various Markets 5 Marks
Perfect competition is a market structure where all firms sell a homogeneous product and each firm have a relatively small market share. For example competition between Apple and Samsung which sell the same kinds of products such as Smartphone, tablets, and laptop. Another example of perfect competition is between Pizza hut and Domino Pizza which run in the same business activity. Monopoly market is the situation when firm owns all or almost all the market on a type of goods and service . It characterized as an absence of competition which results in high prices, price discrimination, market domination, big market share, big sales, and profit maximation. For example Indonesia electricity company or PLN is the only company who have the approval from the government to sell electricity in Indonesia with a low price because it has been subsidize by the government. Same case with another government important institutions like Pertamina which sell gasoline and LPG.
ReplyDeleteThe advantages of perfect competition for consumers are that seller will provide low prices because of the competition between another seller to compete to provide the cheapest selling price for the consumers by increasing efficiency. Consumers are also being benefited because of good quality of product offered by seller as they are competing to create the best quality of good and service to win the competition. Another benefit is that firm are fast to adapt in change of trend in society. For example the shop owner of a fashion shop will follow the new trends of clothes and do research and development and starting to sell the new products.
The advantages of monopoly market is their product are well prepared before the launching because they have put many research and developments on their product.
The disadvantages of monopoly is that there is price discrimination which firm charge a very expensive price than a customer can pay to get an exorbitant level of profit. Another disadvantages such as low quality of product to lower cost of production, poor service, reducing customer sovereignty, and the product may be outdated already.
The conclusion is I agree that pricing and output policies in perfect competition are more favorable to the consumer than those in monopoly.
References :
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://en.wikipedia.org/wiki/Perfect_competition
http://www.investopedia.com/terms/m/monopoly.asp
http://answers.yahoo.com/question/index?qid=20110204114332AAMJg2o
http://answers.yahoo.com/question/index?qid=20100219234954AAq3ued
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
http://www.economicsonline.co.uk/Business_economics/Monopoly.html
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By : Jennifer
ReplyDeletePerfect competition is the market condition when no one has the power to set the price. All participants are price takers. It happens when there are many firms supplying a similar (homogenous) product with lots of consumers.
The prices of goods are based from market price. If a firm tries to raise it’s price above market price it will lose customers to other firms. If it lowers the price, a firm will also make a loss unless production costs are lower than other firms. This would not last long, because when other firms find out about this they can also lower the price and production costs.
Because of these characteristics of perfect competition, the consumers prefer this kind of pricing than monopoly pricing. Since no one can influence the price, consumers can buy at cheaper prices and larger quantity. In monopolies, firms may sell low output with very high prices.
The consumers also has more choices to choose from. There are many firms in a perfectly competitive. So, they can choose to buy the same product from any firm. Since, its easy for a new firm to enter the market, they can have even more substitutes. There are less consumer choice in monopolies.
Quality of product is improved because in perfect competition, firms that reduce the quality will lose demand. In monopolies, product quality is low because firm can cut costs to gain more profit.
Sometimes, to attract consumers the firm also provide after sales services such as warranty for products, after sales care, etc. Consumers won’t get these services in monopolies, since monopolies will cut costs to earn profit.
Even though in perfect competition consumer can buy at low prices, there are drawbacks of using this concept. The products will usually be the same, so there will be nothing new in the market. Quality also won’t improve, so there will be little or no change in the product. On the other hand, large firms, especially technology companies, will always try to think of innovations.
Consumers in perfect competition may benefit from pricing in perfect competition, but they won’t benefit from types of products.
Originality : http://smallseotools.com/plagiarism-checker/
References :
1. http://en.wikipedia.org/wiki/Perfect_competition
2.http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
3. http://www.whatiseconomics.org/microeconomics/perfect-competition
4. http://www.investopedia.com/terms/p/perfectcompetition.asp
Perfect competition is where the situation prevailing in a market, in which buyers and sellers are numerous and that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. Monopoly, however, is almost the exact opposite. Monopoly is a type of market in which a single firm or group owns most, if not all, of the market for a particular industry. Monopoly is simply the absence of competition, which often results in inferior products and high prices.
ReplyDeleteIn perfect competition, there is an optimal amount of competition, and therefore no individual buyer or seller can influence the market price. Perfect competition does not perfectly exist in the real world, but there are a few examples of markets that have similar characteristics and are very similar to perfect competition. An example would be stock exchanges. By stock exchanges I mean the general stock exchange in the world, and not any specific country. Stock exchanges have numerous sellers, in which case, are shares from many different public limited companies, with numerous buyers. But stock exchanges have a flaw: a few large financial institutions (e.g. investment banks) may solely influence the market price. Consumers are especially benefited in perfect competition, but not necessarily the firms or sellers. More choices are available for similar goods because there are numerous competing firms, and they will compete vigorously either using pricing strategies, such as penetration pricing and price skimming, or non-price strategies, such as informative and persuasive advertising. The quality of the goods or services is better also as a result of this. In a perfect market competition, consumer will enjoy a lower market price as a result of firms who compete to gain demand by lowering their price, which causes other firms to lose their customers, in which they will also reduce the price, and this goes on until the price is very close, if not lower, to the cost per unit of output. In monopoly, consumers have less choice of products, lower outputs, higher prices, and lower quality goods and services.
In contrast, monopoly can be beneficial for consumers. Monopoly is generally dangerous to consumers, and pure monopoly is even more dangerous. With monopoly, the firm can make highly abnormal profits and take advantage of their influence on the price of their goods. If the good has an elastic price, the firm may not risk the loss of consumers, so they would not increase their price up to a very high amount. But if the good has an inelastic price, the firm can set their prices as high as they wish and customers will be exploited. But the government can give regulations to control this, and avoid the consumers to be exploited. An example of a regulated (not pure) monopoly in Indonesia is Pertamina, a petrol seller, which is given regulations by the government which is to not increase the price too high so that more people can afford petrol for their vehicles, and this is even further supported by the provision of subsidies.
ReplyDeleteTo conclude what he has discussed, perfect market competition and pure monopoly market is more theoretical than practical, but there are close approximations of some markets that almost fit the criteria. Perfect competition would have greatly benefit consumers in multiple ways, but monopoly, if not regulated, can be extremely devastating to consumers, especially where the majority of the consumers are in poverty, such as here, in Indonesia.
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References:
http://www.investopedia.com/terms/m/monopoly.asp
http://en.wikipedia.org/wiki/Perfect_competition#Examples
Complete Economics for Cambridge IGCSE(R) & O Level Second Edition by Moynihan and Titley
In econmic market structure is divided into two , which are perfect competition and monopoly. For the product that needed by people and important for economic will be held by government its called monopoly. Some product examples of monopoly market in indonesia are gasoline , solar , PLN ( electricity) but recently there are many private company join the market for gasoline. The monopoly can restrict market supply to force up the market price and earn excess profit or up normal profit over and above what it could earn if it had to compete to supply the market with other firm . a monopoly also called price maker.
ReplyDeletePerfect competition is a market structure that has a large number of firm that compete to supply and sell their product in a perfectly competitive market no firm or consumer will have any power to influence the market price , they are all price takers . A competitive market will display many of the following feature , will be vigorous price competition and non price competition between firm supplying similar goods , firms will pursue different price strategy , product feature and brand image will be highly differentiated .
The major factor that influence the pricing strategy or decision of different firms in any market are , the level and strength of consumer demand , amount of competition cost of production , and level of profit . the benefit of pricing strategy for consumer are consumer can choose product that is relevant with their wants, they can choose product with the lowest price or the most expensive which depends on their wealth, consumers wont find a difficulties in finding the substitutes product , because in competitive market or perfect competition , there are a lot of supplier and seller.usually in perfect competition , firm give a lot of promotion such as discount , sample product. Those promotion make consumers got benefited, they get the same good , but with the lower price. Pricing strategy benefit the firm , with pricing strategy , they can enter the competition with other firm. As long as they can give the best price ( they don't loss) best product and some advertisement to reduce competition , they will earn a lot of consumers
in opposite , perfect competition made consumer has a consumptive behavior, because all firms offer the best price, product , promotion to attract the consumers , if consumers act consumptive , they will spend more that can make them has a loan or liability ( credit card ) , because of the a lot of loan , house hold’s economic condition will be affected that at the end can affect national economic
in conclusion , there are many benefit for consumer and firm in perfect competition if they use the pricing strategy. But , consumer got more benefited than firm, because consumer can choose more product that are relevant with their needs and wants. For the firm especially for new firm , pricing strategy give them opportunity to enter the market that has a lot of competitor. Pricing strategy also have disadvantages for consumer and firms which are consumer act more consumptive and firm cant maximize profit
Reference
Complete Economics For Cambridge IGCSE & O Level
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Perfect competition and monopoly market are two types of market that usually happened in economic life.Perfect competition is a theoretical market structure. It is primarily used as a benchmark against which other, real-life market structures are compared. The industry that most closely resembles perfect competition in real life is agriculture. For example, competition between KFC and McDonald which sell same kind of food, such as french fries, fried chicken, ice cream, rice, soft drinks. Monopolistic competition differs from perfect competition in that production does not take place at the lowest possible cost. Because of this, firms are left with excess production capacity. For example PT PAM, only this company they are produce the water for the people daily need. From the definition, we can find differences between perfect competition and monopoly competition in determining price and output policy for the product.
ReplyDeleteFirst, for output production, In a perfectly competitive market, there are many producers and consumers, no barriers to exit and entry into the market, perfectly homogenous goods, perfect information, and well-defined property rights.
Perfectly competitive producers are price takers that can choose how much to produce, but not the price at which they can sell their output.
A monopoly exists when there is only one producer and many consumers.
Monopolies are characterised by a lack of economic competition to produce the good or service and a lack of viable substitute goods.In a perfectly competitive market products are perfect substitutes for each other. But in monopolistically competitive markets the products are highly differentiated. In fact, firms work hard to emphasise the non-price related differences between their products and their competitors'.
Second, difference price are applied between monopoly and perfect market competition. One key difference between these two set of economic circumstances is efficiency. A perfectly competitive market is perfectly efficient. The overall economic surplus, which is the sum of the producer and consumer surpluses, is maximised. The suppliers cannot influence the price of the good or service in question; the market dictates the price. The price of the good or service in a perfectly competitive market is equal to the marginal costs of manufacturing that good or service. In a monopolistically competitive market the price is higher than the marginal cost of producing the good or service and the suppliers can influence the price, granting them market power. This decreases the consumer surplus, and by extension the market's economic surplus, and creates deadweight loss.
A final difference involves barriers to entry and exit. Perfectly competitive markets have no barriers to entry and exit; a firm can freely enter or leave an industry based on its perception of the market's profitability. In a monopolistic competitive market there are few barriers to entry and exit, but still more than in a perfectly competitive market.
As a result, perfect competition and monopoly competition have differences in determine price, output production , and barrier to entry or exit the market. Based on my opinion as a consumer, perfect competition market is more favourable than monopoly market, because we have many choice that we can choose to consume. And then, the perfect competition also has price variation and quality, therefore the consumer can have many substitute product.
References:
Www.lancaster.ac.uk
Www.investopedia.com
Www.boundless.com
Originality: 80%
Each firm must wanted a competition. They do this just to increase and to maximize their firm’s profit. In economic theory, perfect competition (sometimes called pure competition) describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Monopoly is different with competition. A monopoly is simply a market that has only one seller and no close substitutes for that seller's product. Technically, the term "monopoly" is supposed to refer to the market itself. It means that there is only person that sells the product. It reduces the competition. Consumers are more favorable or like a perfect competition rather than a monopoly. Why?
ReplyDeleteThere are some reasons why consumers are more favorable to perfect completion. The first thing is that consumers can choose what type of product that they wanted to choose. They have more options in choosing the products they wanted to buy. Of course logically, consumers didn’t want to buy the wrong product. They must feel sad or waste their money to a product they didn’t wanted to buy. The second reasons is there can be no wrong information because all the information is spread out through the country or city. Consumers don’t to buy without wrong information. They must know what the advantage about that type of product is. If they have the wrong information they must feel cheated or somehow guilty for buying that product. Third reasons are consumers charged a lower price. Why is that an advantage? In a competition the most best selling product or the most profitable company wins. So if they wanted to win, they need lower the price to make consumer’s demand for the product high. If the consumer’s demand high, they sure will buy more and more product from that type of company. The fourth reasons are responsive to consumer wishes: Change in demand, leads extra supply. Consumer will get this benefit. Why? Because, consumer wanted to buy a unique product, and if that company don’t have it, they at least makes that unique product to make the consumer’s wanted to buy that product, but they lot of money and need extra of supply to buy it.
Now we are going to discuss about the disadvantages about it. Why consumer doesn’t like monopoly? Monopoly means that there is only one seller in a market. This is going to be the advantage of monopoly because they could easily charge higher cost with lower quality to consumers. Why those can happen? They can do this because consumer’s have no choices or options left to choose the product. In the market, only that company survives. It is either the consumer doesn’t buy or pay the high costs. The second reasons are economies of scale. An increased output will lead to a decrease in average costs of production. It means that if an monopoly increase in output 1, average costs 1 are much lower than if a competitive market had firms producing at output 2 ( average 2).
So the conclusions is that consumer is favorable to perfect competition rather than monopoly because perfect competition are most benefited to consumer’s demand rather than monopoly. In monopoly, the consumer must follow the company, because they had no options.
References:
http://www.economicshelp.org/microessays/markets/advantages-monopoly/
http://business.blurtit.com/355927/what-are-the-advantages-and-disadvantages-of-perfect-competition
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
http://economics.about.com/od/monopoly-category/a/What-Is-A-Monopoly.htm
http://en.wikipedia.org/wiki/Perfect_competition
Originality:
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Perfect competition is a theoritical market structure that is primarily used as the benchmark against others where real-life market structure is compared, the example of industry that resembles perfect competition in the real life is agriculture, it is also the opposite side of monopoly and it is more benefited to the customer than the monopoly.While monopoly is a situation which a single group or company owns nearly all of the market for a given type of goods or services, it is included in the category of a imperfect market.The example of a monopoly firm are Microsoft and Nike Sport shoes. Pricing and outputs are both can be advantage and disadvantage to the perfect competition market and monopoly structure in various reasons but they are more favourable in a perfect competition compared to monopoly.
ReplyDeleteThe benefit of perfect competition firstly is they allocate the resources in most efficient way which means that both productively and efficiently in the long run. Also, consumers charged at a lower price when they consumed the goods and so consumer also get the advantage. There is no information failure and all knowledge Is shared equally within them as they have a perfect knowledge,in addition less advertising is needed and no barriers to entry is made so firms that exist cannot derive any of monopoly powers. Another advantage is that there may be maximum possible of consumer surplus and economic welfare.Consumer surplus is the situation where the price of consumer pays less than they are supposed to pay while economic welfare is the total benefit available to society from economic.
The disadvantage of monopoly includes anti-competitive, no competition allows low quality of product thus customers are dissatisified and causing consumers to be exploited, there’s also no innovation and little improvement on the products produced by the firm, no price war occurred.Second,productively and allocatively inefficient.The production cost is at its lowest possible cost and cost is minimized.Third, the monopoly contains very high price and high profits, as for the price, it is high because they are set by the firm, which is the price maker and not by the market mechanism.They will ear high profits and it cause disadvantage to the society as well as absence of competitors because they control the market and other firms are not able to compete with them and they have high barrier entry than the perfect competition market.High barrier entry means that company doesn’t feel threatened. The monopoly can also caused price discrimination which they charge different prices on the same products for the different consumers, they charge more on consumers that are able to pay more and less to people who can’t afford it.
In conclusion, pricing and outputs are more favourable in a perfect competition than in a monopoly as it provides lower price for customer, allocate more resources in efficient way, no barrier of entry is made, and there is also a maximum possible for consumer surplus and economic welfare.Monopoly disadvantages because they have high price and profits,caused price discrimination and low production cost.
References:
1. http://www.investopedia.com/terms/p/perfectcompetition.asp
2. http://www.investopedia.com/terms/m/monopoly.asp
3. http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
4.http://www.economicsonline.co.uk/Competitive_markets/Consumer_and_producer_surplus.html
5. http://prezi.com/dwxkjjodtgmu/advantages-and-disadvantages-of-monopoly-compared-to-perfect-competition/
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Felicia Angeline 8A
In economics we can call perfect competition as a pure competition. Perfect competition is the situation in market where many firms sell the same product or homogenous product. There are many seller and buyer in the market. The characteristic of perfect competition is homogenous product, infinite buyer and seller, and profit maximization. The example of perfect competition is the cigarettes market. Because there are many cigarettes company like the sampoerna, djarum, Marlboro, dubhill, and etc. all the company sell the same products, cigarettes and there are many people buy these cigarettes. The price of the cigarettes is the same, the products is the same, and people who buy the cigarettes is many. The other example of perfect competition is the fast food company like mcdonald, aw, KFC and etc. all of them sell chicken with the same price and many customer.
ReplyDeleteThe advantage of perfect monopoly to the consumer is that they can have many choice of products that they can buy in the market. Because when we want to buy smartphone in the market there are many different kind of smartphone with the same feature with different price and colour. The example of the statement above is the Samsung company. The Samsung company have many different kind of phone from the cheapest to the most expensive. The other advantage is there are lower prices in the market because the firm will decrease the price of products lower to lure the consumer to buy their product. The other advantages is that they can get the best quality of the products. For example the apple company will increase the quality of the product every year to make a new phone with a better quality. That’s why apple launch a new product every year. The firm will increase the quality of the products because they want to get more consumer by upgrading the quality of the product. The other advantage for the consumer is that they can get discount or promotion from the company if the consumer buy the product because the company will give a big discount to attract the consumer with the discount.
There are also a disadvantages to consumer from the perfect monopoly. The disadvantage to the consumer is that they can get a high price from the perfect monopoly. This what we call a price discrimination. Price discrimination or price differentiation is a pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets or territories. The apple company use the price discrimination because they do everything to maximize the profit of the products. Another is there will be low quality of product to the consumer. Because firm will keep decreasing the price of the product. The result of the action is the quality will be decrease too because when they decrease the price they buy a cheap raw material with the lower quality.
In conclusion the perfect monopoly is not always beneficial to the company and consumer because the company must be careful when decreasing the price of the product. The result the demand of the product will be decrease and lead to bankruptcy.
Reference
http://en.wikipedia.org/wiki/Perfect_competition
originality 100%
ReplyDeletePerfect competition or sometimes was called pure competition is a firm in the markets that doesn’t have any competitors because the other simillar product that is sold couldn’t compete with the firm and the firm control the market. A monopolistic competition is a imperfect competition where there is many producers sell the products that are differentiated from one another as a goods but not a perfect substitutes such as branding, quality, or price. In monopolistic competition, a firm takes the prices charged by its competitors which is given and ignores the impact of its own prices on the prices of other firms. A perfect competition is more favourable for consumers because there is only a single brand that sold the product with a good quality and there will be no information failure. The perfect competition market has also a very large number of buyers and sellers in this way there is no individual firm in the market that can influence the prices of goods and services. A perfect competitive market will benefit the consumers in term of pricing, quality and after sales services because the price would not be very high and the profit that was achieve from the business would be enough to cover up the opportunity cost. A monopolistic competition is also benefit prices because there is many competitor and they have a homogenous product where when a firm have a lower price than the other company also will decrease their selling cost because if not they will loss the demand for the products that they sell, they were also being benefit from the quality of the product because the higher the quality the more is the demand for it.
ReplyDeleteThe conclusion is both competition have benefit and disadvantages for each consumers and and firm and more consumer is more favourable in perfect competition because it is more trusted and have been demanded for the other people but monolopy competition is also favourable for some people.
Reference:
1. http://smallbusiness.chron.com/advantages-monopolistic-competition-20585.html
2. http://www.whatiseconomics.org/microeconomics/perfect-competition
3. http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
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Robin 8a
In economics, perfect competition (or pure competition) has many buyers and sellers, and prices reflect the supply and demand. They also have substitutes if the product that the consumer wants to buy is too expensive. In a perfect competition, new firms can easily enter the market. Perfect competitions are mostly agricultural industries, such as cotton, oranges, apples, etc. The price in perfect competitions is usually determined by the seller, but prices can change because prices are determined by supply and demand. Of course, the price should not be too expensive for the consumer because if it is, the consumer will find another market that has cheaper products. The output of perfect competitions is the only choice a firm has to make. They should make the output enough or the consumers. If the provide too many outputs, than they can create a loss if no consumers are willing to buy it. A perfect competition also has homogenous products.
ReplyDeleteThe opposite of perfect competition is monopoly. Monopoly is when there is only one producer or seller for a product. Entry of new firms to the market is restricted. Governments can create monopolies over an industry that it wants to control, such as electricity. A monopoly may also be formed when a company has a copyright that prevents other from entering the market (Pfizer had a patent on Viagra). The firm is a price maker but a monopoly can’t charge a price that the consumers in the market can’t afford. A monopoly will always want to maximize its profit. Another example besides electricity is TV Media’s. For example we only want to watch Disney Channel but we should pay for all the channels the TV Media has. The price of a monopoly is that they will sell the output at the maximum price, and the maximum price is the price that the consumers are willing to pay.
There are many advantages of a perfect competition; I’ve listed some in the first paragraph. Another advantages is that the high degree of the competition in this market helps resources to be allocated to the most efficient user, which means no firm in the market can make abnormal profit in the long run, the degree of competition and restriction in price settings will make the firms in this market to operate at maximum efficiency, and a perfectly competitive market will benefit the consumers in term of pricing, quality and after sales services. In a perfect competition too, in the short run, the firms can make super-normal profits or losses. Third, there is no need to spend money on advertising, because there is perfect information and firms can sell all they can produce. Fourth, there is a possible consumer surplus and economic welfare maximation.
A monopoly has many disadvantages, like they have poor level of service, no consumer sovereignty, consumers may be charged high prices for low quality of goods and services, and lack of competition may lead to low quality and out dated goods and services. The charged consumers high prices and consumers can’t change it, because a monopoly can’t changes prices that easily like perfect competition does.
So in conclusion, I agree that perfect competition is better in terms of price and out output than monopoly. Because in a perfect competition the prices can change when the consumer request it or if it is too expensive for the consumers.
Originality : 98% small seo tools
References :
http://www.whatiseconomics.org/microeconomics/perfect-competition
http://www.investopedia.com/university/economics/economics6.asp
http://wiki.answers.com/Q/How_are_price_and_output_determined_under_pure_or_perfect_competition?#slide=3
http://answers.yahoo.com/question/index?qid=20101129124046AAmWEd2
First of all, there are two types of competition in the market, such as, perfect competition and imperfect competition. Perfect competition is when there is a large number of buyers and sellers in the market and the price of the product is the same (homogenous). In perfect competition, the price of a product is made by the offer between buyers and sellers, that’s why both of them can’t decide the price and only act as a price-taker. But, in the real world, the perfect competition or market is doesn’t exist anymore. While imperfectly competitive market is a market where there is one or a few sellers dominate the market or price. If a firm can influence the market price, the market where the company sells its products classified as an imperfect market competition. The example of imperfect competition is PLN and PDAM, because only PLN that provides us electricity, no other firms that will compete with PLN. And only PDAM that provides the water for local people (local water company). Monopoly is included as the imperfect market. The example market of monopoly is the competition between shampoo company, because there are so many brand of shampoo in the market.
ReplyDeleteThe advantage for the consumer of doing perfect competition is that they will be provided a products with many choices. As the competition is running, each market will compete each other. So in order to win the competition, they will compete either with pricing strategies or non-price strategies. As the result, the consumers are benefited becasue the market provides the lowest possible price due to the maximum level of competition. They will also compete by using non-price strategies, which can be made by advertising their product. There are two types of advertising, which is, persuasive and informative advertising. This advertising can bring advantage to the consumer because it can provde them lots of information. The products sold in this market also homogenous, which means that the products are almost identical and the consumer does not prefer one product to the other. Both buyers and sellers also act as a price-taker which means they have to accept the prices set by the laws of demand and supply. When markets are competing, they will also produce the best quality of their product, so the consumer will get benefit of better quality products.
The disadvantage of monopoly are that they can provide low qulity of products which they will sell it in higher price due to the duplication of resources not being available. Monopoly also lacking of quality services. In monopoly, only the company itself that get the advantage. There is no consumer sovereignty, and in monopoly, there’s no competition, which can be result as the low quality and out dated products.
In conclusion, the pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly. Because in monopoly the one that get benefit only the firm itself, while in perfect competition, they can provide good quality of products with lower prices.
References :
http://en.wikipedia.org/wiki/Perfect_competition
http://www.whatiseconomics.org/microeconomics/perfect-competition
http://www.ask.com/question/advantages-and-disadvantages-of-monopoly
http://www.ask.com/question/disadvantages-of-monopoly
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vienetta christina 8a
Firms generally involve in a competition. Competition is usually divided into two, perfect and imperfect competition. Imperfect competition is divided into many other forms, one in which is monopoly. Perfect competition, also known as pure competition, is where firms involved are not big enough to set the price of a homogenous product. This type of competition is when generally participants are called price takers, meaning no participants have control over price it sells or buys. Participants of this competition sell the same product and all the firms generally have small market share. Perfect competition opposes the monopoly, in which only a single firm supplies a type of product. In perfect competition, many buyers and sellers are present. Buyers have options to the product, there are substitutes and complementaries, like for example, the substitute for iPhone is Blackberry. Buyers who couldn’t afford the expensive product can choose to buy a cheaper product, with same functions, but lower quality.
ReplyDeletePerfect competition is advantageous to both business and consumers. One benefit to consumers is that business will provide lower price in order to gain market share. Lower price will cause consumers to buy more of the product, thus create an explosion of the demand. This will cause market share of the firm to increase, and the product will reach high success. Another benefit for consumers is that firms will provide good service to maintain customer attention. Good quality service will attract customers to consume the business’ product and thus gain more attention and more profit. Business are benefited to competition too, as their suppliers are also business, thus the suppliers also give lower price on materials used to create the business’ product. But the firm also has a disadvantage; the firms would lower price more if there are other lower price to create the lowest price, thus profit came to its decrease, thus there will be little income for the firm.
Monopoly is a type of imperfect competition, wherein there is only a single firm providing a type of goods and service. Example of this are the tap water supplier company and PLN, Indonesia’s electricity provider. Consumers of this product pay each water and electricity taxes. This firm controls the products market share, as they are the only one who provide that type of service. One characteristics of monopoly is that there are many buyers in the nation or world, due to the fact that there is only one firm that provides the kind of service. The products or service also has no form of substitute and the firm enjoys abnormal amounts of profit.
Monopoly has benefits to the controlling firm. The firm has no competitions, thus owns all the market share and the profit. Since monopolies make lots of profit, it can be used for research and development, to maintain monopoly. Monopolies could also use price discrimination which benefits the economically poor society. Monopoly also avoids duplication and avoids high amount of wastage.
The disadvantage to monopoly is that there is no consumer sovereignty and may sometimes result in poor level of service
So in conclusion, pricing and output policies are more effective and favorable to consumers in perfect competition, because in monopoly there is no way it is effective since there are no competition and there is only one firm.
References :
1. http://www.investopedia.com/terms/p/perfectcompetition.asp
2. http://www.investopedia.com/terms/m/monopoly.asp
3. http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
Originality : 100%
Jonathan, 8A
Perfect competition is a market structure where all firms are selling a homogenous or identical product, and where buyers have such complete information about the product sold and prices charged by firms that all elements of monopoly will be absent and all firms are price takers – they are not able to set their own prices. While monopoly is a market structure where one firm owns all of the market for a particular product or service. Monopolies are the extreme example of capitalism, when there is no competition in the market. Therefore, the firm is able to set high prices and produce inferior goods.
ReplyDeleteIn a perfectly competitive market, all firms are price takers. They can only sell goods and services according to the market price, based on the equilibrium of demand and supply. Any firm selling their products at a higher price would instead make a loss because all goods in every firm are homogenous, so there are no perks or superiority of a product over another. The demand curve in a perfect competition is perfectly elastic. The graph is horizontal, with demand in the x-axis and price in the y-axis, which means that if a firm raises the price even a little bit, demand will fall to zero. Demand is not defined in any other higher price value. There is only one price at which demand is defined – the price corresponding to the height of the curve. A perfectly competitive market benefits both firms and consumers. Consumers will be charged the lowest price since the firm produces at the minimum price of the average cost curve, therefore their real income will increase. Consumer wealth will be able to rise and the overall economic growth is better as firms are not threatened by very large firms. Consumers will also receive maximum choice for goods as there are many firms in the market. Consumers will earn sufficient information about the products they want, allowing people to have more informed choices. Customer satisfaction would increase. ¬¬In a perfect competition, firms would be encouraged to innovate, causing a faster pace in invention and innovation. Consumers would be able to experience the benefits of new, innovative and useful products in their lives. On the other hand, perfect competition is not always good. The most significant point is that products are homogenous. Therefore, there is a lack of variety in goods and services and a lack of competition in product design and specification. Consumers cannot have any freedom to choose the kind of products they want. Neo-classical economists have always argued that perfect competition increases efficiency. However, this is not always the case. In a perfectly competitive market, firms are often unable to generate abnormal profits in the long run, therefore they remain small. They do not have enough capital to invest in raw materials for producing more goods. They might be unable to achieve economies of scale and production costs remains high. When production costs are high, firms are often unable to charge low prices. A perfect competition can also be produced by a monopoly being broken up into small competing firms. Each of these firms only own a small fraction of the market quantity, and therefore have higher average costs than the monopoly itself. As a result, even though monopolies are conceived as inefficient, small firms are even more inefficient.
In a monopolistic market, the firm is the price maker¬¬ and output is based on the market demand. The demand curve slopes downward, which means that the firm will sell more with lower prices and vice versa. If the demand for its product remains unchanged, the firm is able to raise its prices by reducing its output. For example, a petroleum supplying company in a country may be able to sell their output per litre for a higher price when the supply is low. However, product differentiation is present, meaning that there is no close substitute for the goods supplied by the monopolistic firm. Consumers are able to receive a one-of-a kind product. As monopolistic firms are often supplying goods in a very large scale, they may take advantage of economies of scale, leading to a fall in the average production costs. These reduction will help monopolies achieve larger profits but some of the gain will be passed to consumers in the form of lowering prices. The abnormal profits the firm earn will not only be used for shareholders’ equity, but also research and development of their products that potentially bring dynamic efficiency to consumers. Successful R&D can be used to improve products and lower costs. As an example, research done by pharmaceutical industries are very significant to the development of new, better drugs. Monopolies have an incentive to innovate because when they do, profits rise. Monopolists have no competitors because of the existence of barriers to entry. Therefore, the firm is able to retain higher profits in the long-run and hence is urged to innovate. Consumers can experience the benefits of these new goods and services available to those who are willing to pay.In a contestable market, where a firm produces a product with no close substitutes and has no competitors, but there is no barriers to entry to prevent other firms entering the industry, the threat of competition is enough to prevent the monopolistic firm from raising its prices. Consumers would benefit from low prices for goods with satisfactory quality. Nonetheless,for few exceptions, monopolies can be bad for the consumer.Monopolies reduce consumer surplus and economic welfare. Consumer surplus is the difference between the price consumers are willing and able to pay with the price they actually pay. There is usually a higher producer surplus than consumer surplus in a monopoly. The monopoly manipulates producers and consumers for their own benefit, raising prices above the equilibrium level while decreasing quantity produced. As a result, a deadweight loss appears. Monopolies are also known for price discrimination to consumers, giving different prices to different consumers. For example, a telephone company provide services at different times at different prices, e.g. a call made in 12.00 am is cheaper than one made in 2.00 pm, although costs for providing these services are the same. There is no consumer sovereignty in a monopolistic market. Consumers are unable to control the market or even get the goods they want. They will be dissatisfied because monopolies tend to sell goods at high prices with low quality.
ReplyDeleteIn conclusion, both perfect competition and monopoly has its advantages and disadvantages to consumers. However, as it is impossible to achieve perfect competition in all markets, applying the theory of second best, it would be best to keep monopoly power, as we do not know if making one or few markets competitive will increase efficiency. Monopolies should be regulated, not broken down in small competitive firms.
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ReplyDeleteReferences:
1. http://www.investopedia.com/terms/m/monopoly.asp
2. http://answers.yahoo.com/question/index?qid=20090506091657AAV6r1h
3. http://www.tutor2u.net/economics/content/topics/competition/competition_importance.htm
4. http://courses.missouristate.edu/reedolsen/courses/eco165/notes/pc-m.pdf
5. http://www.tutor2u.net/economics/content/topics/monopoly/benefits_of_monopoly.htm\
6. http://www.economicshelp.org/microessays/markets/advantages-monopoly/
7. http://www.jbdon.com/pricing-under-pure-competition-and-pure-monopoly.html
Originality: 99% based on smallseotools.com/plagiarism-checker/
ReplyDeleteReferences:
1. http://www.investopedia.com/terms/m/monopoly.asp
2. http://answers.yahoo.com/question/index?qid=20090506091657AAV6r1h
3. http://www.tutor2u.net/economics/content/topics/competition/competition_importance.htm
4. http://courses.missouristate.edu/reedolsen/courses/eco165/notes/pc-m.pdf
5. http://www.tutor2u.net/economics/content/topics/monopoly/benefits_of_monopoly.htm\
6. http://www.economicshelp.org/microessays/markets/advantages-monopoly/
7. http://www.jbdon.com/pricing-under-pure-competition-and-pure-monopoly.html
Perfect competition is a market in which all the competing firms sell the same product, and each firms have less market share.To be defined as perfect competition, a market must have these 5 qualities,All the firms must sell the same product, Firms are price-takers, they can't control the market price of their product,all firms should have relatively less market share, the consumers must have full information and price of the product,and lastly all firms must be allowed to join or invade the market.
ReplyDeleteThe firms can't control the market price of their product,the consumers will get most benefits.The firms can't increase the price of their products,if they do then their total sales would decrease and they will lose market share,then they will lose power to compete with other firms.So all the firms maintain their product's low market price.Consumers will be the winning side,they won't have to pay so much to buy a product from these firms.Also, it's easy for a new firm to enter a perfect competition, and if they do enter,it will just add competition for these firms, they must continue to lower the price of their products because customers can simply buy the product that has the lowest price.Firms really have to keep their prices low and gain the least profit if they want to survive in this kind of market.All of this is good for the consumers,the more firms, the more choices.They can choose the firm that sells their product with the lowest price.
Monopoly is a market structure in which there is only 1 available firm selling a product in the market.Since there's only 1 firm available,that firm can easily change the market price of their product, they can set the price to a really high price,because even if they do this,consumers won't have any other choice but to buy their product.Consumers are in the losing side in a monopoly, they only have 1 option, and that option is ridiculously unfair.Unlike in perfect competition,it's hard for a new firm to enter a monopoly,this is a disadvantage for consumers too, they need a new firm to join the monopoly so the market price of the product won't be so high.
The conclusion is that consumers will always be happier in a perfect competition market rather than a monopoly,they need not spend a lot of money to buy a product because the price of products in a perfect competition will always be kept as low as possible.
Jovan Pan 8A
References:
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://en.wikipedia.org/wiki/Perfect_competition\
Originality:100% (plagiarisma.net)
Perfect market is the term where both producer or suppliers and buyers are numerous. There are no perfect market but one example that is close to perfect market is stock exchange. Monopoly is where there are only one producer or supplier but they have numerous buyers, so it means that they are the only one who sell the different product, an example of monopoly businesses are PLN. In monopoly it means that they have no competition in the market so it means that they could do whatever they want about the price and the quality of the price, while perfect market would have a big competition as there are a lot of suppliers as competitors and there are a lot of buyers where all competitors are trying to attract the buyers.
ReplyDeleteAs perfect market has a lot of competition they are trying to produce superior goods or the best quality goods. And as they struggle to beat the competitors they reduce the price ir price penetrating where when they reduce the price other competitors doesn't want to lose so they also decrease or reduce their price where because of competition consumers would have a big benefit as the price of the products are lower and the quality are superior. And as monopolistic has larger share of the market, they have more resources to spenc for research and development where it could enable tem to have new techniques to increase the quality of the product. As this happens consumer could have a higher quality of goods and services.
And while in monopoly as they have no competitors they could dharge consumers with high prices and lower quality goods and services where they could do that as there are no competitors and as they are the only one in the market. And as the business is a monopoly it means that they are large so as competitors arrive at the market they would lost the competition as the monopolistic business are already large with a large market of share and because the business are too powerful to beat. And in monopolistic they have less consumer choice as no competition and they could have x-inefficiency where their resources are used in the most efficient way where thry may be managed inefficinetly and as the cost of production would be higher than in a competitive market.
In conclusion, monopoly companies could increase the price as the wuality of goods are lowered because as they arenin a monopoly market where there are no competition or no competitors to compete with them,mso they could control the price of their products, and because the monopoly, they would try to use the mst efficient way where the production cost may be higher than in a competitive market where because of the cost of production, the prices could be higher. While in perfect competition they are in a competitive market so they would try to produce superior or best quality goods and services where and because of competition they would decrease the price to attract more competition and as other competitors doesn't want to lise they would also decrease the price, this is called price penetration. So, perfect competition would be more benefit for the consumer rather than monopoly competion
Refference: http://answers.yahoo.com/question/index?qid=20100219234954AAq3ued
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Brian.A 8A
Perfect competition is the situation prevailing in a market in which buyers and sellers are also numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. Perfect competition is developed by economists in order to compare different market structures. Which there will be a large number of different firms competing to supply an indentical product and an equally large number of consumers wanting to buy it. They are all price takers, which if the firm tried to increase their price, the market share will be decreased. So market price would fall. Actually they does not really involve competition at all, but because of the products are identical, all firms have to have the same average cost.
ReplyDeleteThere are some advantages of perfect competition for consumers, first, The high degree of competition in this market helps resources to be allocated to the most efficient consumers. Second, No firm in the market can make abnormal profit in the long run. Third, Degree of competition and restriction in price settings will make the firms in this market to operate at maximum efficiency. Forth, A perfectly competitive market will benefit the consumers in term of pricing, quality and after sales services. Fifth, consumers are charged a lower price, so its beneficial for them because they can fulfill their demand with a lower price. Sixth, it is responsive to consumer wishes: Change in demand and leads extra supply. And there are advantages of monopoly. First, it is avoids duplication. Second, It enjoys economics of scale as it is the only supplier of product or service in the market. Which The benefits can be passed on to the consumers. Third, monopolies make lot of profits, which it can be used for research and development so they can increase their product and make their consumers satisfied. Fourth, They may use price discrimination which benefits the economically weaker sections of the society. For example, Indian railways provide discounts to students travelling through its network.
There are disadvantages of perfect competition. First, insufficient profits for investment. Second, lack of product variety. So consumers will be interested to buy a product in a company that has the same product with them but with lower prices. Third, lack of competition over product design and specification. Forth, unequal distribution of goods and income. Fourth, a perfect competition may cause pollutions. And there ar disadvantages of monopoly. First, less consumer choice. By restricting competition from rival producers and products a monopoly offers the consumer less choice than would occur in a competitive market. Second, lower output and higher prices, which they can restrict market supply to set a higher market price than would otherwise occur in a competitive market. Third, lower priduct quality. Which they have no great incentive to increase the quality of the goods or services it supplies. Forth, X inneficiency, which they may make less effort than a competitive firm to ensure that its resources are used in the most efficient way. And this is caused by organizational slack due to a lack of competition.
In conclusion, pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly because in this problem, consumers get a lot of benefit than the firm. Because consumers can choose their own wants to be processed by the firms. But the firm can also get more benefit rather than consumers, because they are the only one that can choose how much price they will give to the consumers, which they are price maker.
References :
ReplyDelete- complete economics for cambridge IGCSE& O Level second edition by Dan Moynihan and Brian Titley. Page 261,263-264.
- http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
-
http://wiki.answers.com/mobile/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure
- http://www.whatiseconomics.org/microeconomics/perfect-competition
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ReplyDeletePerfect competition and Monopoly are the two extremes of market structures. There are some similarities between firms in a perfect competitive and monopoly. Both face the same cost and production functions, and both seek to maximize profit. The shutdown decisions are the same, and both are assumed to have perfectly competitive factors markets. A market can be structured differently depending on the characteristics of competition within that market. On the other hand, Monopoly, exists when there is only one producer and many consumers. Monopolies are characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.
ReplyDeleteBoth Perfect competition and Monopoly have some similarities, but also have some very important differences. The key Similarities that perfectly competitive and monopoly is elasticity of demand in the long-run. In both circumstances, the consumers are sensitive to price. The key Difference between these two set of economic circumstances is efficiency. A perfect competitive market is perfectly efficient, while in a monopoly competitive market the price is higher than the marginal cost of producing the good or service and the suppliers can influence the price, granting them market power. Also, there is no bariers to entry and exit in Perfect competitive ; while there are few barriers to entry and exit in monopoly.
So, in my opinion that both systems Perfect Competition and Monopoly each have advantages and disadvantages. In relation to the consumer the price mechanism prevailing in Perfect Competition would be much more beneficial to consumers than Monopoly as a result of price competition among firms. Then, the perfect competition will create more stable and cheaper prices. In addition, the consumer will get a higher quality goods because firms will continuous in improving the quality of production in order to compete with other products. Consumers have many choices for goods that they needs, and supply of goods in the market remains guaranteed.
In terms of output policy, then at least Government have things to do. The first, for which the utility is a monopoly, the government must be firm in setting policy rates. this should be done so that the producers are not arbitrarily establish or raise prices. Otherwise, the price gets out of control, and ultimately the public or the consumers who will be harmed. Indeed, in practice it is inevitable that for some utilities and infrastructure related to the lives of the consumers, the government should conduct a monopoly. this is done mainly to protect consumers and the public, as well as avoiding a greater impact on economy.
In perfect competition, The government act as a facilitator in providing rules to prevent unfair competition. Unfair competition, especially reflected in the price, and the quality of production that would be detrimental to consumers. In monopoly market, the Government needs to do a tight control over the member of monopoly firms. This is done to prevent them from practices that could harm consumers. The common practice been done by the member of the firms that include as the monopolistic group is limited the production of goods so that the supply of goods in the market is decreases. These conditions they serve as the main reason to increase the price.
Base on the above description, finally, I tend to agree that pricing and output policies in perfect competition are relatively more favorable to the consumer than those in monopoly by the main reason of efficiency and the cheaper price.
originality: 86%
Deletereferences:
https://www.boundless.com/economics/monopoly/monopoly-production-and-pricing-decisions-and-profit-outcome/market-differences-between-monopoly-and-perfect-competition/
http://www.oocities.org/znuniverse/micro_economics/Price_Determination_under_Monopolistic_Competition.htm
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=oligopoly+and+monopolistic+competition
https://www.boundless.com/economics/monopolistic-competition/monopolistic-competition/monopolistic-competition-compared-to-perfect-competition/
Perfect competition is a theoretical market structure. It is primarily used as a
ReplyDeletebenchmark against which other, real-life market structures are compared. The industry that most closely resembles perfect competition in real life is agriculture, such as the firm that produce car such as, daihatsu, toyota, suzuki, ford, honda, etc. Perfect competition is the opposite of a monopoly, in which only a single firm supplies a particular good or service. Monopoly is a situation in which a single company or group owns all or nearly all of the market for a given type of product or service. For example, the firm which produce the gold jewelry with the high price. The consumer usually prefer supplied by perfect competition rather than monopoly. Because its depend on the price and production.
First, we can find the differences between perfect market and monopoly market in determining their sales price. In monopoly market, that firm can charge whatever price it wants because consumers have no alternatives and it is difficult for would-be competitors to enter the marketplace. As the result, the price is high and inferior product. Under perfect competition, there are many buyers and sellers, and price reflect supply and demand. Also, consumers have many substitutes if the good or service they wish to buy becomes too expensive or its quality begins to fall short. New firms can easily enter the market, generating additional competition. Companies earn just enough profit to stay in business and no more, because if they were to earn excess profits, other companies would enter the market and drive profits back down to the bare minimum.on other hand in monopoly market the company can earn fix profit because the consumer do not has other choice.
Second, efficiency concepts is one of the factor that influenced the production in perfect market competition and monopoly market, such as productive efficiency, X-efficiency, allocative efficiency, andstatic and dynamic efficiency. Perfect market can produce many type of product, but monopoly only can produce one type of product. Perfect market competition have a low cost of production because many products are produce and going to sell to consumer. While in monopoly have a high cost of production because they need a special equipment to make the product and they just sell a limited product. Therefore efficiency of production is higher for perfect market rather than monopoly market.
As the result, i agree that consumer is prefer supplied by perfect competition market than monopoly market. Perfect competition market have many advantages than monopoly market because they provide a low price, more effective production and many kind of product that people can choose.
refference:
www.investopedia.com
originality: 95%