-
Grade 8B Economics
________________________________________________________________________
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
-
Grade 8B Economics________________________________________________________________________Case Studies based QuestionPerfect 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, 2014Please Write Your Response in 500 WordsNote:1. Write with references.2. Market evidences in support of your reasons.3. Marks allocation for this article is 20Rubrics for Marks.A. Theoretical Explanation 5 MarksB. References. 5 Marks [Use Harvard referencing style]C. Use of Key words. 5 MarksD. Examples from various Markets 5 Marks
Ok first is that Perfect competition is a condition where customer or consumers are very numerous and producers are also numerous so producers fight for the consumers by lowering price and others and so in this market price is determined by the market not consumer neither producer example is seller in tanah abang they cant decide the price market did second is monopoly , mono means one so it means one firm control all so the one that determined the price is the firm and customer will still buy even if they are expensive fine example is apple iPhone even if its expensive people are still fighting to buy it this is the example of monopoly the question is whether pricing and output policies in perfect competition are more favorable than those customer in monopoly . Ok lets discuss
ReplyDeleteFirst is the person will be happy with the pricing in perfect competition are of course or definitely more favorable to the customer in monopoly because if there are many producers and consumers at the same time can make the one that decide the price neither consumer nor producers but the market itself so of course the price will be lesser because the producer cant altered the price even they will make it cheaper so more people will buy their product so the customer or consumer will really get benefited by the perfect market competition
Second is the output policies ok output policies definition is the insurance coverage of a manufacturer offsite property that helps to
Ensure that the manufacturer product is covered during transition to the final destination of the product ok so by this we can know that the people in monopoly have special product that nobody else have and so if they fail shipping their product because of problems wont be sold in the market and so customer couldn't buy the product even if they really want or needed it that moment while in perfect competition if one failed to have the product the consumer or buyers can go to the other numerous sellers or producers that also might have cheaper product
So in my conclusion is that perfect market competition is more preferable than monopoly because of various reason such as cheaper product because people in perfect market competition are fighting over for customers and the one that decides the price is nor customer or even either the producer its the market itself and second is output policies in monopoly market if their product is once lost they wont sell or will delay the product sales while if its in perfect market economics system it wont be delayed because there are a lot of producer so consumer can just switch producer that they wanted that have high quality and cheaper products so my conclusion is that the answer of whether pricing and output policies in perfect competition are more favorable than those customer in monopoly is yes the perfect competition are more favorable to those customer in monopoly
Sources
notebook
http://answers.yahoo.com/question/index?qid=20100903205056AAB5N83
Plagiarism check
100% original
PART I
ReplyDeletePerfect competition market means a market which type is a homogenous market. It has many similar producers in that market. It means that the product design, features and quality are all can be found on each different producer, which the only difference is only the brand or the firm’s name that produces the products. And the explaination why the market is perfectly competitive, is because the products all are similar or even same, could be found anywhere, in any seller, so that each producer should follow the market or industry settled price. They cannot set their own desired price, and if they do so, no one buy their products. Why? Because customers won’t be stupid at this kind of market. If they see the price is “even only a bit” higher, they won’t buy it and will find another seller which offer the same products properties with only different producer or brand. In this type of market, none of firms could be able to dominate the market, because the one that has authority to set the price, could be said, the customers. While imperfect competition market is the opposite of the perfect market competition, means a market which type is a heterogenous market. Here, there are only few producers which offer special unique products, which are not found in another brands. It is said imperfect competitive market because the competition level is lower or much lower than in the perfect competition market, and also there are some, few or even only one firm or brand which dominate the market. That means even though the firm (the dominator) set high price, consumer will keep to buy their product. That means the firm’s product condition is inelastic. But sometimes it is not because the product or firm’s condition is inelastic, but because there is only one, two or few producers that offer a basic product. Usually for that is happened with one type of imperfect competition, it is monopoly. In monopoly market, only one producer are exist in the market which also be the market dominator and customers will have no choice to choose another product because no other firms exist in the monopoly market, so that if the firm increase the price up to a very high product price, customers will automatically will be forced to only buy their product.
The example of perfect competition market is notes and exercise book market. There is no any firm(s) that able to dominate the market. All customers when go to book store or stationary store will always find the cheapest note books available such as lowest price notebooks or a bit more expensive notebooks with more pieces of pages or finding a promo such as buy 3 get 1 free. Because all types of notebooks always has same quality, features or function, jus for writing, drawing and reading usage, nothing more. So if one of the notebooks producers set higher price than the standard price, so no any customer will buy its released notebooks. On the other hand, the example of imperfect competition market, which we are gonna to take monopoly as the example, is PLN in Indonesia. PLN is the only electricity provider in Indonesia which dominates the electricity services provider. So, even though PLN’s services is not very well, or could be said bad because frequently happened uncountable shortages times, they are still willing to have same number of customers even though they also increase their product price beside having poor services to customers because the Indonesian customers will have no other alternatives to get electricity.
PART II
ReplyDeleteIn perfect competition market, in order for a firm to struggle in or lead the market, not dominate the market, it should use various pricing and output policies and strategies in order to attract more, more, more and as much customers as possible. They may use penetration pricing policy, which set the price of product as low as possible when just releasing product, so that customers will be attracted to buy the product which has similar features with lower price. Or the firm may use price skimming policy which still keeps at high price even during product release but just make the product to be more innovative than others. Or the firm may also use destructive price strategy which set the product price to be very very low so that no customers desire to buy other products and buy that firm’s products. Or the firm may use price war. Because in the perfect competition market all prices of the firms’ products should follow the market standard price, so a firm may use price war which undercut each other firms’ prices. Beside reduce prices or increase features, the firm in in perfect competition market may still set the market standard price but has very large scale in production (mass production) in order to have lower cost, so that they can still can gain more profit. While in imperfect market competition, such as monopoly, those standalone firm no need set any pricing and output policies, just increase the price with making the service worse, customer will still buy the product such as PLN in Indonesia the provides electricity services, because customers in Indonesia don’t have any another alternatives.
So, based on above discussion, it is correct that pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly.
But sometimes, the standalone firm in monopoly market don’t always be like that. They usually may use price skimming policy which increase their product’s features and services. The firm do that in order to create better brand image, trusts from customers, customers are happy with the services which are benefit for the firm so that if they do acquisition on another firm, people will also trust the acquired firm because the one who acquired are already being trusted which is that standalone company in monopoly market. Beside features, it may also find the most efficient way for the product’s production in order to make the company to be bigger, bigger and gain more profits. While in perfect competition market, the seller often not use any of pricing and output policy. They only keep their business that and that again without having desire to keep growing because they don’t want to take risks.
So, in conclusion, the one that wanna go bigger and bigger are always use various pricing and output policy, while the one that not using those policies, means they are afraid to take various risk that have possibilities to pop out.
Referance:
Class Notebook
No any plagiarism was detected - Small Seo Tools
Perfect competition is a market structure that has a lot of sellers and buyers, so there’s high competition. In a perfectly competitive market there will be a large number of different firms competing to supply an identical product and equally large number of consumers wanting to buy. An example is the competition between the smart phone companies such as Apple and Samsung. When one of the rival firms produce a new product, the other firms will also produce new products to compete with the firm. A monopoly exists when there’s only one seller but there are a lot of buyers. The government usually allows monopoly because the company produces goods that are essential for life such as electricity, water, etc. An example of a monopoly in Indonesia is PLN, Pertamina ( only for gas).
ReplyDeletePricing strategy is a strategy that is uised by the company to give the best selling price possible for the customers. If most of their customers are rich the company will give a higher selling price( the profit will be greater). If most of the customers are middle classed the company will give a lower selling price. An example is indomie for the rich, supermie for the middle classed people, and sarimie for the poor.
In perfect competion a company will compete with each other to sell products with a good price and the best products. The companies will diffrenciate their products like tebs, frestea, etc. The advantage for the consumer is that there will be more products to choose from, the output of the product from the company is also high so the product will never run out. Consumers can also pick the product with the most suitable price and there will be more advertisements and promotions so the industry of advertising will increase this will effect the economy. In monopoly the consumer has very little choices, the price is usually expensive because there are no competitiors and the quality of the product is not so good so perfect competition is better for the consumers.
If there are too many customers, the consumers will be confused to pick a product which will make the consumers very extravagant. This will cause the customers to have a debt that will effect the economic condition of the house hold. But if in monopoly market the consumer doesn’t have a lot of choices but if the price is too high the people will also suffer losses.
So in conclusion the consumers will benefit from perfect competition because there are more products to choose from, the quality of the products are good,etc. Even though the customer benefits from this the company instead does not benefit from perfect competition. The company will need to do a lot of advertising and promotions which is very expensive while on the other hand monopoly companies will benefit from monopoly because there are no competitors and they don’t have to do a lot of expensive advertising and promotions. The customers though wont benefit from monopoly because of lack of choices and the quality of the product isnt so good.
References
Economics book
http://en.wikipedia.org/wiki/Monopoly
100% unique content
Perfect competition is a type of homogenous market .In a Perfect competition , there will be a large number of different firms competing to supply an identical product and an equally large number of consumers wanting to buy it . As such , all producers and consumers will exchange at the equilibrium market price . Monopoly market is a market that only have one supplier of a good or services wanted by consumers. Now , Pricing and output policies in perfect market will of course more favourable to the consumer than those in monopoly . But sometimes its also can be different .
ReplyDeleteSo , Pricing and output policies in perfect market will be more favourable to the consumer than those in monopoly . Well this statement is so true because in perfect market , no one can set the price . There will be a lot of producers and also a lot of consumers . they all are price takers . So in perfect market there will be many advantages that will received by consumers , which are , First , There will be no different prices among all of the firms . All the prices are same and usually its cheaper . The example will be like the Tanah Abang store . In here , there are a lot of producers and consumers . They all are price takers . No one can set the price . But , usually the price is cheap .A lot of people going here because they sale a lot of cheap products . Second , consumer can have more choices . Because there are a lot of producers , than consumers can choose which shop they want to buy with . They can choose which shop that have higher quality . There will also a lot of different model to be chosen. So consumers can be benefited from this . Third , there will be higher quality . Because there are a lot of producers , than each of them are competing to have a lot number of consumers. Consumers will of course want to buy a high quality of product . So , all of the producer will compete to produce that high quality of product . in here consumers will earn a lot of benefit . Now , if in monopoly market ,consumers will usually got a disadvantages , which are , first , Less consumer choice . This is because they only have one producers . The example will be like the national gas supply network in the Uk .Its the only one in Uk . So all people must used that because they don’t have any other choices . second , there will be lower output and higher prices . Because there is only one producers , they can set the prices with their own want .All of the people must use them because they re the only one . Third , there will be lower product quality.
But sometimes , it can be the opposite of it . sometimes , monopoly can be more benefited to the consumer than the perfect market . Some monopoly market are being subsidized by the government . Because of this usually they have a lower prices . the example will be like pertamina gas . They are the only one who sell gas in Indonesia and all people need it . So government subsidized it and make the price cheaper . Second , They may have a higher quality . Some monopoly that is being subsidized , must follow all the criteria that the government want . They must sell a high quality product , and all of the steps are being maintained by the government . So , in here , consumers can be benefited .
ReplyDeleteSo the conclusion is that , Perfect market will usually be the one who benefited the consumers rather than the monopoly market . Perfect market can make more benefit to the consumer because they have a lot of producer and all of the are price takers . If in monopoly , They only have one producer , so that’s why sometimes there not providing what the consumer want.
Result : 100% unique content
References :
Textbook , notebook , Wikipedia , http://answers.yahoo.com/question/index?qid=20071126071033AAJnhzc
Kezia – 8b
A perfect competition is a situation in a market when the amount of producers that are selling the product is so high that the producers need to be competitive on their price. In a perfect competition every producer is trying to be competitive, usually this involves lowering the price to attract more customers to the product, therefore making the company much more competitive in selling. While, a monopoly is a situation in a market when there is only one producer of the type of product. This is a situation where the producer has no need to be competitive, and would increase the price of the product as consumers are forced to purchase their products in order to buy that certain product.
ReplyDeleteIn most cases a perfect competition will benefit the consumer and a monopoly will not benefit a consumer whatsoever.
As an example pricing, in a perfect competition the pricing of products are going to be much cheaper than they are in a monopoly. Because in a perfect competition every producer wants their products to sell the most, this is a motive for producers to be competitive in pricing. When producers become competitive in pricing, the consumers benefit as they will have cheaper products to buy. It will be the opposite in a monopoly as there is no need for competition in the market, therefore leading to higher prices, thus not benefiting the consumer at all.
Another area where perfect competition benefits the consumer is product quality. Just like in pricing every producer wants to be competitive in their products, some producers do not actually prefer lowering the prices, but increases quality of the product to be competitive. Again just like pricing this benefit the consumer more than the producers. But this does not happen in monopoly, as there’s only 1 type of product in the market, again there is no motive to actually increase the quality.
At certain view point the consumer maybe the one who is less benefited in a perfect competition compared to a monopoly.
One of it is the fact that every producer tries to be the same in order for them to sell. In a perfect competition every producer tries to be competitive, at some situations it means copying the same product. So there will be no actual variety in the actual market. This could be annoying to the consumer when they want something different from another producer. These situations are often called undifferentiated products, and happens generally in cars or the clothing market. One example would be the sports cars, most of today’s sports cars in the market are the same and have little to no difference among each other than the branding of the actual car.
But in a monopoly the situation is worse as there is only 1 product in the market. And provided by only 1 producer.
To conclude what i have discussed, there are some situations in which the consumer is not benefited by a perfect competition, but overall the consumer will benefit more out of perfect competition than a monopoly.
References:
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
Notebook
I have check with smallseotools.com/plagiarism-checker for any signs of plagiarism, results show that my content is 100% Unique
There are 2 types of competition, perfect and imperfect. Perfect market has no monopolies present, just numerous amount of producers competing selling the same type of good, they’re homogenous. On the contrary, there is imperfect market. Imperfect market has various producers, which sell various types of products and where monopoly is present, an example would be chocolate producing firms (Hershey’s, Nutella, Cadbury, etc) . In imperfect there are monopolistic competition, oligopoly, duopoly, monopoly and monopsony. Monopoly is when a firm/producer controls all or nearly all of the market for a type of good or service. There is only one producer in the particular good or service hence it all relies on him, an example is Apple (iPhone).
ReplyDeleteIn perfect market the pricing and output policies are different than with monopoly. The market forces of demand and supply determine the prices, and all the firms are price takers. In the perfect market there are various producers for a single good or services, so for consumers, it will be more favorable since they will have more choices to choose from. Whilst in monopoly, all the firms are price makers, they have only one choice to choose from and they can set the price very high and yet have no choice but to buy it, cause there isn’t any other producer.
The competition in between firms inside the perfect market will be high and hence giving the consumers abundance of benefits. If the competition is high between firms then the firms will fight to lower the prices (advantage to the consumers so they can reduce their expenses), increase their product quality (consumers will get better goods), give rewards or prizes (even more benefits to the consumers).
Since the firms in the perfect market are price takers, they can sell the outputs at market price without any pricing strategies. All that matters are the costs. The lowest firm will be in the market even in the long run. Competition will forces the high cost firm to shut down and leave the market. On the other hand, in monopoly the firm will determine price and output based on his demand curve. He will maximize profits when maximum cost equals to maximum revenue, and when the price is higher than MC. To do that, it will produce less to charge higher price. There is no competitor in the short run.
So in conclusion, I think that the pricing and output policies in the perfect market will be more favorable to the consumers since they are more beneficial to the consumers.
Charlene 8B
100% unique content
References:
- Notebook
- http://www.investopedia.com/terms/m/monopoly.asp
- http://www.investopedia.com/terms/p/perfectcompetition.asp
ReplyDeleteA perfect competition is the opposite of a monopoly; a monopoly is when there is only one firm producing a particular goods and therefore they can charge whatever prices they want because there are no other alternatives for the customers to rely on, therefore there are no competition in monopoly. An example of a monopoly is PLN and PAM here in Indonesia. They are both the only company that provides electricity and water supply for the people in Indonesia. A perfect competition however, has many producers and consumers. The price of the product depends on the supply and demand of the goods. a perfect competition will of course have a lot of competitors in the market. They usually will have small market shares, identical products, price takers, and they are homogenous.
As said before, a perfect competition’s pricing will reflect on supply and demand in the market. Therefore, the prices will also affect consumers in several factors, since there are many competitors in the market, each firm will try to reduce their cost so more consumers will buy from them, other than that, there are many small firms that just entered the industry, so they will start to give low prices to the customers. This can benefit the consumers by providing cheaper alternative of goods. An example in the real life market is the Oppo Company, which they just started to enter the industry, they are selling cheap phones compared to Samsung and Apple Inc. therefore consumer will have more choices to choose from. The competitors in the market will also try to increase the quality of the product; this can benefit the customers by receiving better quality of product. An example is various luxurious hotels such as the JW Marriot hotel and various low class hotels such as Aston hotel. In JW Marriot, they give better services and satisfactory, while Aston, they treat customers with low services. Other than that, a perfect competition is a price taker; this means they cannot control the price of their product. Also, advertisement plays an important role in the industry, an advertisement will give several bonuses and extra features to their product, this means that customers will have more advantages is several companies that provides advertisement, other than extra features, they may also give discounts or installments.
A monopoly however, has several disadvantages to customers, for example, since they rule the industry, they may provide bad quality of goods and services to the people, an example is PLN, PLN often have trouble with providing a good quality of electricity, they often cause blackout (electricity shortages), and bad services for customer care. This is because they will not be afraid if they lost customers, well, they wont, because customers will not have any other alternatives, so they wouldn’t care much if they give bad quality of services. But a monopoly may give benefit, a monopoly company is often own by the government, therefore, they will give subsidies to the consumers so price may be cheaper, but in fact, sometimes they still charge high prices. The prices in monopoly is actually being controlled by the government, so the prices are already fixed, because of this, customers will not have any other alternatives, unlike the perfect competition.
ReplyDeleteTo conclude my essay, yes, perfect competition in the market will benefit the customers more rather than monopoly. Because by output policy, in perfect competition, there are alternatives that customer can choose from, so quality and services may be differ from each other, unlike monopoly, people cannot choose, so quality and services will be bad. By pricing policies, because there are many alternatives in perfect competition, so prices may range from expensive to cheapest and customers may choose, and they are price takers but in monopoly, they must pay what the company charges them
Celine Kusnadi 8B
Reference:
http://www.investopedia.com/terms/p/perfectcompetition.asp
Notebook
100% unique by http://smallseotools.com/plagiarism-checker/
This comment has been removed by the author.
ReplyDeletePerfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. It means that perfect competition means the sellers cannot set the price to the product they sell to their consumers, the prices of the product is formed by the market itself not by the customers. Well, pricing and output policies in perfect competition are more favorable to the consumer than those in monopoly, yes it’s true but in other side it may look wrong too.
ReplyDeleteWell, now the statement of pricing and output policies in perfect competition are more favorable to the customers than those in the monopoly. It is because the market cannot set their prices at their product they sell, the prices of the product is set or formed by the market itself, so it is homogenous market. Let’s see the reason, first, since they can’t set the prices of the product so all the prices would be the same, and so consumers only buy the product with one prices at every shop, well usually the prices is cheap, example in the market, they are several shops that sell the same fish, the price of the fish that is been sell in the several types of shops , the prices of the fish would be the same, so the consumers no need to choose the cheapest price again cause all the price is the same. Second, there will be a better quality of goods; it is because they earn their profit only by doing that, since all the prices are same so they need to produce or create a better product so that consumers want to buy their product. Third, the variety of goods, the shops must to produce variety of goods so that the consumers can choose which one they want to buy and the one that the consumers like. So they perfect competition can make the consumers more benefit than the monopoly because they have only one price, many variety of products and of course higher quality of the product.
But not always, sometimes the monopoly itself can be more favorable to the consumers, well as we know monopoly means they are only one producer or there is only one seller that sells that kind of product so that people or consumers have to buy that product. Example like PLN or pertamina , they both are monopoly because only they that sell that kind of product. People or consumers will buy their product because if they don’t buy their product they will don’t have electricity and fuels. Sometimes government would also give some subsidy to them so that consumers can buy their products.
So in the overall conclusion, perfect competition would be more favorable to consumers because they have the same price so that people doesn’t need to choose the product for the cheapest price again, they also have higher quality because they will compete so that consumers will buy their product, and they also have variety of things or product so that consumers can choose which product they want to buy and they like. But not always, monopoly would also can be more favorable because monopoly like PLN is like a must to consumers in order to get the electricity.
References:
notebook
http://en.wikipedia.org/wiki/Perfect_competition
plagiarism cheker : 100%
Competition is the rivalry between sellers/business in achieving goals or aims (Ex. Increase in profit, lower productions costs, etc.) by varying variables, like; price, products, marketing, etc. Competition is divided into 2 structures; Perfect competition and imperfect competition. In a perfect competition, the supply and demand depends on the price, but in a perfect competition, they have a big number of sellers that sells identical products, which means that there the competitors have no enough market power to control over the price. Perfect competition is often compared to monopoly, which is when there exist a single firm/business that offers a particular good/service that can only be produced by, giving them enough market power to take control over the price.
ReplyDeletePrice plays a large part in the competition. As said from the above, perfect competitions have a lot of sellers of the identical products, as well as substitute products, if the prices all, there is likely for more demands and with that there would be more supplies but if the prices is high and with the presence of the other substitute products, there will be a decrease in the demands. Opposite of the perfect competition, monopoly has a firm with the control of the price of its product, commonly innovative and new ideas/ products, which means that now matter how high the price is, there will always be the demand for it and with the additional lack of competition, the prices may get high but the demand will still be high.
As a firm/business, it would of course produce outputs that are to be sold later, in the perfect competition, with the lot of firms producing identical products, demands to one specific company would be lower as compared with the monopoly firm, which likely would limit in their production as they are the only one providing it, riding with this, they wouldn’t have to worry for the decrease in demand but for he firs in the perfect competition, they have do something for them to keep continuing in the market (Ex. Advertising, etc.).
So, in order to concluded of what have been said above, pricing and output policies are not that favourable to the perfect competition because the supply and demand changes with the prices and none of the competitors in the perfect competition can control them, giving them uncertainty in their sales/profit and on how many to produce, opposing the monopoly, which has one firm that can control the price of the (Usually, new and innovative) product that many demands and the lack of competition.
Reference:
http://en.wikipedia.org/wiki/Competition_(economics)
http://www.investopedia.com/terms/p/perfectcompetition.asp http://en.wikipedia.org/wiki/Perfect_competition
http://en.wikipedia.org/wiki/Monopoly
Plagiarism Checker: 100% unique content
Grace – 8B
In economics, there are 5 market strategies : 1.) Market Condition 2.) Market Structure 3.) Taxes and Subsidies 4.) Business Objectives 5.) Production Cost. Market Structure refers to the characteristic of the market. It’s the number of firms producing the same, identical product. From what we’ve learn, perfect competition is a type of market structure in which a large number of different firms competing to supply an identical product and an equal large number of customers willing to buy or purchase. And so, all the producers and consumers will have to exchange at the equilibrium market price. In a perfect competition, no firms or consumers in the market are allow to have the authority to influence the market share. They are all the price takers. What is meant by a price taker is that, if for example a firm tries to influence the market price, then it will lose to rival producers and will soon go out of business. Infact, the market price would fall. This kind of competition in a market may be favourable for consumers, it is because the market price makes some sense and is logical, as the demand and supply will meet up at the equilibrium point. All the firms are price takes, while the demand curve is perfectly elastic. Customers will also have many different choices of suppliers that sell the same products. They also can buy the products with a low price due to the competition. Consumers would definately enjoy this kind of competition in a market. The other type of competition that we’ve learn before is Monopoly. Monopoly is a type of market structure where in the market, there is only one producer or there is only one provider of the type of good or services. So, in this type of market, that particular producer is the one deciding the price of the goods or services since it is the single market provider. Either it is the price or the output, both are set by the firm. In this case, the firm is a price maker. But the demand curve will slopes downwards. There will be of course a higher selling price as the producers will be maximizing their profit. Consumers need that particular product but there is only one producer in that market. Customers will deifnately dislike it, but due to their needs, they will have to buy it. Eventhough it is expensive and is not favourable.
ReplyDeleteSo, in my opinion, a perfect competition in a market is more favourable compared to monopoly compeitions. For the pricing and outputs of the perfect competition, it is very logical and make some sense. Customers will also have many choices of the same product with same price but different quality. But in monopoly, eventhough the quality is bad, there is only that particular producer producing that stuff, so customers will have to buy it.
References : Notebook, http://www.economaldives.net/2012/03/17-pricing-and-output-policies-in.html , http://en.wikipedia.org/wiki/Monopoly
100% unique content
-Regina Tanugrah 8B
First of all, monopoly and perfect market are different. Perfect market is when the wuantity of both the firms/producers and consumers are in a large amount. And the consumers know all of the knowledge of the product sold or the prodyct which they going to buy. The firms here sell more or less the same product, the very similar one, and the firms are price takers, they cant control the market price of their products. Sometimes this competition is known as pure competition, and since there are many firms to compete with, some firms may choose to reduce the price so they will attract the consumers of other firms, in the same industry, to buy at their firm instead, and when the other companies realize that, they will also reduce their price, so that the consumers will go back to them and they will still earn revenue.and they may increase their advertisement so that more consumers will be attracted to them. While monopoly is when in the market of a particular place, theres only this one company, one and only so consumers will have no choice to choose them, and the company can happily play with the price, because there are no competition and the company will be the happy company. And theyre the price maker and they have abnormal profits.
ReplyDeleteIn perfect competition, the firm sell their products according to the market price without making or using any strategy, cost is important here, there are some small firms that were able tp stay even in a long run, and the competition will force the companies which produce high cost to shut down and leave the market, or can be say that the company fails. Meanwhile inn monopoly, the companies set prices according to the curve they made, the demand curve. The firms will try to get as much profits as possible when the marginal cost is equal to the marginal revenue, and also when the revenue is higher than the cost. Most of the firm will set high prices yet they produces the product in low quantity, its predicted that there will be no competition because theres no competitor in a short run.
Firm in monopolistic will get more profit, why, because theyre the only producers available and everyone want don’t want will buy their product. They use economy of scale, applying economy of scale will increase the profit, but in monopoly market, there are low competition which will make the firms become less motivated and they might put high prices for a low quality product. The easiest example In Indonesia is PLN, which supplies electricity to us all, their service are really bad, and they don’t even improve and they put very high prices and even increasing each year.
In perfect market, itll encourages competition and encourage the firms to improve their quality of product, and itll benefit the consumers and because it’s a competition, the firms will compete for the conmsumers and may reduce their price even more.
So in conclusion, both perfect and monopoly market has their own benefits to the consumers and producers, but in perfect itll benefit the consumers more because consumers get low prices for high quality
References: imagination, http://wiki.answers.com/Q/Discuss_the_price-output_policy_under_perfect_competition_in_the_short_and_the_long_periods, http://economictimes.indiatimes.com/definition/monopoly, http://www.investopedia.com/terms/p/perfectcompetition.asp. plagiarism: 100%
Economists have developed the concept of perfect competition in order to compare different market structures. As such, all producers and consumers will exchange at the equilibrium market price.That is why they are called the price takers. Price takers means firm is the one who decided the prices , not the consumers . So, the prices of every product will be the same to be sold to all consumers. A firm would be unable to produce much more cheaply than others. Even that if it did, it couldn’t do so for long, as other firms would soon find out how this was done and use the same methods to lower their own production costs. Subsequently, market prices would fall. A perfect competition market usually does not need any competition at all – since the products are same identity , all firms have the same average costs and have to accept the same market price.
ReplyDeleteA competitive market will show some many of the following features;
- There will be price competition and non-price competition between firms supplying similar goods and services.
- Firms will pursue different pricing strategies depending on the type and amount of competition they face from new and existing competitors.
- The range of the product designs available, the quality of after-sales services and product prices will tend to change frequently as firms develop new ones they hope will attract consumer demand away from other products.
- They will also increase their market shares since they are a competitive market and their objectives is also to increase the profits of their business and try to maximize it.
A single dominant is called a monopoly. The opposite extreme in economics of perfectly competitive market is a pure monopoly. A firm is a pure monopoly if it is the only supplier of a good or service wanted by the consumers. Monopoly can restrict their market supply to force up the market price and earn excess profits or abnormal profits over and above what it could earn if it had to compete to supply the market with other firms.
The disadvantages of monopoly :
1. Less consumer choice.
2. Lower output and higher prices
3. Low product quality
4. X inefficiency
5. The need for regulation
Two main types of barrier to market entry:
1. Natural barriers to entry
2. Artificial barriers to entry
Natural barriers to entry
1. Economies of scale
2. Capital size
3. Historical reasons
4. Legal considerations
Artificial barriers to entry
1. Restriction on supplies
2. Predatory pricing
3. Exclusive dealing
4. Full line forcing
So in conclusion, In a perfect market, the firm is the one who will set the prices to their consumers. A monopoly is a single dominant market. A perfect competition market also doesn’t involves any competition at all.
References : Economics TextBooks
- Leonardo Steven 8B
91% Unique Content checked by http://smallseotools.com/plagiarism-checker/
The Socialist Myth of Economic Monopolies http://iakal.wordpress.com/2014/03/12/the-socialist-myth-of-economic-monopoly/
ReplyDelete