Grade 8A Business
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Case Studies based Question
- Monopolies around the world are very strong in their marketing strategies. These companies generally spent significant amount of money on the promotion and protection of the market. Consumer benefits by getting more cost effective efficient innovative products. As compare
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Discuss whether consumers would always want to be supplied by firms in perfect competition rather than by a monopoly.
Last date for Submission:
March 16th, 2014
Please Write Your Response in 1000 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 same type of product or homogeneous product and have low prices which is set on basis of demand and supply. Each firms have a small market share and a freedom of entry and exit. Perfect competition market have a large number of buyer and seller. There is no example for perfect competition but an example for almost perfect competition market is the fish market who sells almost the same type of product. Monopoly market is when a firm own the whole or almost all the market share of the given type of product or service. Or can be easily defined as there is no competition in the market of given type of product or services. In this type of market the firm is the price setter. The firm in monopoly market tends to sell in high price to maximize profit. This may cause price discrimination or charging a price that more than a consumer may reach. The quality of the product itself may be bad. A cause of monopoly market for example is from the patent right so the firm can monopolize the product they invented.
ReplyDeleteBenefit of perfect competition for consumer are that firms are able to offer consumer the best possible price or the lowest price possible to the consumer. It also make firms compete to create the best quality goods that they can achieve. The advantages of monopoly are that the goods or service produce are in good quality. Another advantages of monopoly is that they have enough funds to do research and developments of their product so it can be produce in a better quality and maybe lower cost.
The disadvantage for perfect competition is that firms may not have enough funds to do research and developments so that the goods of services produces may not be improved to a better quality or outdated. The disadvantages of monopoly to consumers are that firm may charged high price for products that may not have a high price for example clean water. Firm in monopoly market can also produce in low quality to maximize profit by reducing cost of production.
The conclusion is I agree that consumers would always want to be supplied by firms in perfect competition rather than by a 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://en.wikipedia.org/wiki/Monopoly
Originality : 100% unique content
Perfect competition is describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Monopoly is simply a market with only one seller and no close substitutes for that seller's product. in monopoly a seller is price taker . so all of the product can be charge in a higher price and the consumer must follow and buy their product from the seller.
ReplyDeletePerfect competition is more likable in consumer because, first, there are many substitute of one product and can be varies price. So the consumer can choose what they want to buy and what brand they want to choose with the suitable prices. In monopoly, the product that affects and needed by public is proc\vided with one seller, usually with government. So the consumer doesn’t have any choices to buy any product except the monopoly product. Examples of perfect competition, electronic devices. Samsung compete with Apple and with Lenovo. They provided the best quality with the competitive price, so that they can win the competition, and so that more consumers can buy their product. Example of monopoly product, gas. There is only one seller of gas in Indonesia, which is the Pertamina. Not long ago, the prices of gas are dramatically raised, so the consumer doesn’t have any choices to not buy when it is needed. A few days later, the prices are decrease so the small supplier or distributor of gas gets loss because of that. The consumer also gets loss because if they bought a few days they paid more cost than they bought after few days later. So, the consumer didn’t like the monopoly market.
But, in perfect competition market there are also price war, it means that the company that have a good reputation and brand name, can set the prices higher prices, while the quality is standard. For example perfume, polo and Casablanca. They both have the same aroma, same volume, but the prices is very different. Cablanca can be bought in low cost, while Polo is being bought in high prices. Sometimes the consumer, buy Polo because in their mind set, Polo perfume has better that quality than Casablanca or other. Because the Polo perfume company has made a brand image to our mind that makes us wanted to buy the product. Besides, not always the cheaper product has a worse quality than higher prices product.
In monopoly, consumer also can get the bad quality of product because the supplier feels, they don’t have competitor so, they can sell anything in high with bad or worse quality.
In conclusion, consumer is favor in perfect competition because consumer has more choices than the monopoly. It is also because the supplier can provided with best quality with a competitive prices, rather than the monopoly firm, that provide the products with a low quality or low quantity with a high prices. It also because the consumer don’t have any choices or has less choices.
References:
http://economics.about.com/od/monopoly-category/a/What-Is-A-Monopoly.htm
http://en.wikipedia.org/wiki/Perfect_competition
Originality:
100% Unique Content
Perfect competition is a situation prevailing in a certain market, in which sellers and buyers are numerous and that all elements of a monopoly are absent, therefore the market price of a commodity is beyond the control of an individual buyer or seller. Monopoly, however, is nearly the exact opposite. Monopoly is a type of market/competition in which a single firm or group owns most, if not all, of the market of a particular industry. Monopoly is basically the absence of competition, which often results in non superior (or inferior) products and/or high prices. Consumers always like to feel like they are getting a good deal on the goods or services they purchase, and consumer surplus is simply an economic measure of their satisfaction. For example, a consumer goes shopping for a DVD player and he/she is willing to spend $400. When this person finds that the DVD player is on sale for $250, economists would say that this individual has a consumer surplus of $150.
ReplyDeleteIn a perfect market competition, consumers are generally benefited for multiple reasons, but monopoly generally is not beneficial to consumers for numerous factors. In a perfect market competition, all the products in the particular market are homogenous. Homogenous products refer to a state of products in which they are almost, if not, perfectly price elastic. Perfect price elasticity is a theoretical economic situation in which the interest of consumers/buyers in purchasing a company’s product is extinguished if the price of the good/service rises, or consumer interest rises up to infinity if the price decreases. In a perfect market competition, most of the products or goods sold are having similar, if not same, prices. This suggests that the firms are price takers, while the industry is the price maker. A firm which is a price taker can alter its rate of sales and production without significantly affecting the market price of its product. For example, imagine that you are selling water, which obviously is supplied by millions of other places, including clouds. If you decide to set the price of a bottle of your water at $10, you will probably sell nothing, because this particular commodity is readily available elsewhere for a much cheaper price. An industry as a price maker suggests that it can dictate the prices of its products because there are no perfect substitutes for it. In stock trading, a price maker is a stockholder who owns a large proportion of shares and is able to affect/change the stock's price. In a perfect market competition, artificial barriers to entry are minim, although natural barriers of entry still exist. Examples of natural barriers to entry can include economies of scale, capital requirement, technological requirement, legal considerations, and in some cases, historical barriers. In a perfect market competition, there is a greater consumer surplus. In a perfect market competition, resources are optimally allocated, because firms cannot afford to have inefficiencies in this type of competition, as they need to have minimum costs and low prices in order to compete with other firms. With intense competition, prices are very low to allow an increase in consumer demand for a firm’s product. A low price means the consumers can purchase goods and satisfy their needs or wants with a lower price. Firms will be responsive to consumer demand changes, which mean that a change in demand will cause the firm to change its supply. A monopoly market is generally not beneficial for consumers. As a monopoly consists of only one firm, less consumer choice are available. Rival firms are restricted by multiple ways such as artificial barriers of entry like control over supply and materials of a particular industry, predatory pricing, full line forcing, and exclusive deals. Full line forcing refers to a producer or supplier insistence that the dealer must carry the full range of products in the line. This policy may not be illegal if it can be established about how it serves as a legitimate business need. In monopoly, consumers are given higher prices as there are no other substitutes which can provide lower prices, and because there are no substitutes at all. In a monopoly, X-inefficiency can occur refers to the technical efficiency that cannot be achieved due to a lack of competitive pressure. X-inefficiency is the difference between efficient behavior of businesses assumed or implied by economic theory and their observed behavior in practice. Another result of the lack of competitive pressure is the poor quality of the products produced.
ReplyDeleteIn contrast, perfect competition has some disadvantages to consumers, along with monopoly, which have a few advantages. Because in a perfect market competition there is much competitive pressure, therefore there may not be any time or money that can fund research and development, hence there is less innovative products for consumers to enjoy. Due to the minim profit margin, firms in a perfect market competition may have insufficient funds to properly manage their waste products, such as heavy metals, or dangerous gaseous chemicals. This results in poor environmental quality and may cause sickness or even death. Individuals’ houses may be contaminated and themselves be affected negatively. Monopoly, however, can avoid duplication of production, hence avoid the wastage of resources, which means the environment and consumers’ living area may not be greatly affected. If regulated, a monopoly firm can use its achievement of economies of scale to lower the prices and benefits the consumers. Besides lower prices, a regulated monopoly can benefit the economically weaker sections of the society. An example is how Indian Railways can provide discounts to students travelling through their network. The large amount of profits that monopoly firms receive can be used for research and development, hence possibly bringing innovative or more technologically advances products to the market for consumers to enjoy. Lastly, in a monopoly, the firm can dedicate itself to bring more contribution to public exchequers.
ReplyDeleteTo conclude what we have discussed, both perfect market competition and monopoly can bring benefits and disadvantages to the consumers, but in majority, the consumers are more benefited when their needs and wants are supplied by a firm engaging in a perfect market competition, rather than a firm in a monopoly.
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References:
http://www.investopedia.com/terms/p/pricetaker.asp
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
http://answers.yahoo.com/question/index?qid=20100219234954AAq3ued
http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?#slide=2
http://www.investinganswers.com/financial-dictionary/economics/price-maker-3186
http://www.businessdictionary.com/definition/full-line-forcing.html
http://en.wikipedia.org/wiki/X-inefficiency
Complete Economics For Cambridge IGCSE® & O Level, Second Edition, Made by Dan Moynihan and Brian Titley, unit 4.4, pages 252-265
1031 essay words
1071 total words
Monopoly is where there is only one supplier and there are numerous buyers, where it means that monopoly firms are the only firm in the market, which it means that they control the whole market. In monopoly, as there are no other firms or competitors it means that there are no competition. An example of monopoly is PLN, where it is the only electricity business in Indonesia, where there are no other competitors with PLN. While perfect market is where there are both numerous of suppliers and buyers. Perfect competition is where there are a huge amount of competitors or there is a big competition in the market. There is no exactly a perfect competition yet, but an example of a business where almost reaches perfect competition is stock exchange. In perfect competition, all firms produce an identical or homogenous product where all of the firms are price takers. In a perfect competition, the firms have a perfectly elastic demand curve.
ReplyDeleteMonopoly isn’t always bad for consumers as monopolies make a lot of profit, it could be used for research and development and for innovations. This monopoly firms may use price discrimination which benefits the economically weaker sections of the society. For example, Trans Jakarta provide cheaper cost where it would be beneficial for the consumer, the environment, as there are less private cars, and for the firm, as more affordable price would attract consumers which there would an increase of sales, to increase the market share. This monopoly usually produces unique and innovative products or services where would attract people to consume their products. And a monopoly enjoys using economic of scale as it is the only supplier or seller of product or services in the market which would benefit both the firm and the consumers as the increase of production and the decrease of average cost or the cost of production as where the consumers could have more supply of the product or services as the production rate is increased and they may receive discounts as there is an increase of raw material. And as in a monopoly market the prices are most of the times stable because there is only one firm in a market where there is no competition, so it is rare where the prices are changed. And a monopoly firm offers services efficiently and effectively. While perfect competition produces undifferentiated products which are boring, as there are a huge amount of suppliers, consumers are bored with the product. As in perfect competition they tried to destroy their competitors, they would reduce their cost as to attract the consumer with lower prices, and as that occurs, they would minimize their profits and by having less profit they are unwilling to invest in research and developments as they have no extra funds to do research and development. There would also be lack of variety of the products, as they are trying to compete in an identical product or services with other competitors. And as some perfect competition firms are trying to advertise their products and services, it would waste resources. An example are billboards that are on the road, they would need to use materials, electricity to run and produce the banner, and as they are also using natural resources like land which also they produce visual pollutions as some firms try to use non-pricing strategies.
Firms that are monopolizing the market could lower the output and increase the price, as lowering the output would decrease the cost of production and increasing the price would make them to have an increase in the revenue. And as the revenue increases and the cost of production decreases, it causes them to gain abnormal profits. They could do this because as they are the only one in the market or they control the market, so they could increase the price as what they want, and consumers needing for the product are forced to buy the product in high prices as they are the only firm that produces the identical products and services. And as they try to decrease the cost of production and because they don’t have any motivation of competing with other firms or there is no competition, they could produce lower quality products. And as they have less consumer choice as they are the only one who are in the market, consumers are having less choices of what they want or what they demand. And as in monopoly there are only one firm producing identical products and services, it would make less workers or more unemployed workers, because as perfect monopoly has many firms, it means that there are many workers working in the firm in the perfect competition. And a monopoly firm gives consumer exploitation and where there would be dissatisfied consumers as they get a raw deal from a monopoly firm because the quality is not that good, therefore consumers are dissatisfied with the firm’s product which are also in a high price. While perfect monopoly is allocative efficient where it is because P=MC. And as perfect competition firms are having a lot of competitors they are trying to produce superior goods and with lower prices which would attract more people, which consumers could buy the goods and services with less price and higher quality, and it would be more affordable where some less fortunate could also buy higher quality goods as prices are low. And it would cause X efficient where competition between firms will act as spur as the increase of efficiency. And as some firms advertise their products, it would give information for consumers before purchase, access to innovative products and it would be easy to compare with other goods and services produce by other firms.
ReplyDeleteSo, consumers doesn’t always want to be supplied by perfect competition firms, as their products or services are boring of indifferent with many other competitors, and as monopoly firms have innovative and unique products, where because they have abnormal profits, they could use it to do research and development for new and innovative products as where perfect competition firms would not invest and do research and development as they have minimize their profit in competing with other firms. And as monopoly firm may use price discrimination which would help or benefits the economically weaker sections.
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Refferences:
http://knownai.hubpages.com/hub/Advantages-And-Disadvantages-Of-A-Monopoly-Market
http://www.economicshelp.org/microessays/markets/perfect-competition/
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
Brian.A
8A
Perfect Competition is a type of market where there are many supplier or seller that provides goods and services with the difference of price and quality , or simply there are many competitors. Monopoly is a type of market where there is only 1 firm that supply or provides a particular goods or services that are needed for many people. Advantages of perfect competition are consumer have many choices , they can compare the prices between 2 or more products. Therefore advertisement is needed to attract people to buy their latest product which increase the growth of advertising , and telecommunication industry. The weak points are perfect competition have a lot of cost to advertise their product, firm that can compete to provide the best product with the best price will survive in market perfect competition
ReplyDeleteAdvantages of Monopoly market for firm, firm does not need to spend more money to advertise their product , consumer will not think twice about the product that they want to buy. Disadvantages of Monopoly are , price that is set by firm can increase , because that firm is the only one that provides the product, which consumer can be not benefited or loss, for consumers, they don't have many choices to be chosen , only 1. If the monopoly firm cant provides the product , there will be a scarcity, which lead to the increase price of the product .
Consumer expect more products from perfect competition firm because they have many choices , many substitutes , and there wont be a scarcity. So consumer are more benefited from suppier in perfect competition market. Consumer also like the price in perfect competition , because it is relevant to the goods and have many promotion like discount , buy 1 get 1. For distributor , they like perfect competition more than monopoly , because if 1 firm cant provide the goods so distributors can buy goods from other supplier .in perfect competition , the choices of consumer likely based on advertisement and promotion of the product.
Monopoly market is usefull for consumer if they provides the product with the low price , especially for the underprivileged, so the consumer can satisfy their needs and wants with product with the relevant price to their wealth, Monopoly market make consumer save more money, because the model is the same , only 1. Sometimes supplier in monopoly market act unfair, by increase the profit more than once a year, which make the consumer unsatisfied. But consumer have no more choice to buy that product from other firm or supplier.
In conclusion , consumer is more benefited from the perfect competition because, there are more choices, the price is lower or relevant , many substitute product, no scarcity products, stable price ,more promotion that benefit the consumer . In monopoly , the firm can increase the price forcefully especially when there is scarcity of product because supplier in monopoly market act as price taker. Example : PLN rate, Tol fee.
Reference : Complete economics for cambridge igcse & O level Second Edition
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Perfect competition sometimes called pure competition is market situation where there are many seller or supplier selling homogenous or same goods and service. In perfect competitive market there will be a large number of different firms competing to supply an identical product and equally large number of consumer wanting to buy it. The characteristic of perfect competition are many buyer and seller, profit maximization, homogenous product or same product , and no barrier of entry. The example of perfect competition is the cigarette market because there are many different brand of cigarettes with different price and same taste. Monopoly exist when a specific person or enterprise is the only supplier of a particular market. The example of monopoly in Indonesia is the PLN company. The only electric supplier in Indonesia is the PLN company because there are no other electric supplier. People only buy electricity from PLN.
ReplyDeleteThe reason why consumer always want to be supplied by perfect competition is that they want to buy the cheapest goods or service from the supplier. When there are perfect competition, firms will always decrease their goods or service price to get the consumer. There are many choice because there are many firms to sell the product and service with different model of products. The other advantages of perfect competition Is the quality of the product. In competition, firms will always find a way to increase the quality. So the firms increase the product of the goods and service to attract consumer. The other advantage of perfect competition is that the consumer can buy a new product because there are many new product launched every year.
The reason why the consumer don’t want to be supplied by the monopoly is there will be less consumer choice because there are only 1 firm in the market. The consumer have no more choice. So consumer will always buy from the only firm. The example is the PLN company. Consumer only can buy electricity from PLN. If they don’t buy electricity from PLN they can’t use electricity. The other is lower output and higher prices. Mean the only firms only produce low output and they sell the goods or service higher. For example the PLN company only can sell the electricity to the people that can pay for it. Not everyone can use electricity because the electricity cost is high. The other reason is lower product quality. The lower product quality mean the quality of the good or service is bad. The example is the PLN. In Indonesia there always happen the massive blackout almost every year.
The conclusion is that the perfect competition is better than the monopoly. Because the quality and pricing.
Reference
http://en.wikipedia.org/wiki/Perfect_competition
http://en.wikipedia.org/wiki/Monopoly
complete economics for cambridge igcse and O lver 2nd edition by dan moynihan and brian titley
originality 96%
Perfect competition is a market structure in which there are a lot of buyers and sellers,thus the market price of the product can't be controlled.Unlike perfect competition,in a monopoly there are a lot of buyers but there will only be 1 seller.The seller could control the market price of the product.A firm that's in a perfect monopoly can create more efficient innovative products,but the market price of that product will still be high,in perfect competition, consumers will be able to benefit because the market price of the product will be kept as low as possible.
ReplyDeleteIn a perfect competition,consumers can choose over a variety of choices,unlike in a monopoly where there will only be 1 absolute choice.The market price of the product in a perfect competition will also be kept as low as possible, consumers will be delighted to buy cheap products.Also,even if products in a monopoly market might be innovative, the quality of the product would more likely be worst than the product from a perfect competition market, because most private firms will do anything to gain more profit.Also,the efficient innovative product that came from a monopoly might not be affordable,because creating the product needs a lot of research and development which will create more cost for the seller,thus they will charge a very high price for that product.Also, some people prefer a perfect competition market because some firms in a monopoly offer goods/services that are cheap but with a comes with a very low quality,the services are so bad but consumers have no other choices to choose from.
But some people may prefer being supplied by a firm in a monopoly, for example poor people would prefer being supplied cheap services by the government rather than from a firm in a perfect competition.Even if the service comes with a very low quality, they just can't afford to buy other products.Also,some rich people would love to buy an efficient and innovative product to improve their lifestyle and to make their life simpler.Those people won't care about the outrageous price offered by a firm in a monopoly,they would like to enjoy the innovative product offered.Also, people in general would love to buy innovative products, some might need them and some might want them.These people that are greedy would be hypnotized by the product,they want to be respected in public by showing the new innovative product they own, they want to feel more valued by owning that product.
The conclusion is that most people can't even afford buying those innovative products from a firm in a monopoly,but some people might be greedy enough to buy it.But in general most people would prefer being supplied by firms in a perfect competition because they have lots of choices,the market price of the product is cheap and the product itself would more likely have a better quality than the product sold in a monopoly.
Jovan Pan 8A
References:
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://en.wikipedia.org/wiki/Monopoly
Originality:100%
Perfect competition’s meaning is a condition where there will be a large number of firms competing to supply identical products and also large consumers demand to buy the products. It is used to compare different market structures and it is in the category of a pure competition.Both firms and consumers are price takers because they can’t influence the market price.Consumers can be supplied from both perfect competition market and monopoly market.Monopoly market is a firm that has the ability to influence the price and quantity of the market, it is in the category of imperfect competition. There are many advantages and disadvantages of perfect competition and also monopoly.The examples of perfect competition are agricultural markets,free software and street food vendors while for monopoly is Apple company,Microsoft Office, Google, Nike and Samsung company.
ReplyDeleteThe advantage of perfect competition for consumer firstly is low price due to the maximum competition level with other firms.By having lowest prices they attract more consumer to buy their product so they can earn higher profit and income in order to keep on competing with other firms in the market and it helps to complete many firm’s objective which is called profit maximization.Also, it has homogeneous product, this means that they sell similar qualities of product and therefore customers will get higher quality of product than in monopoly market, where qualities are low because they want to earn most numbers of profit. Aside from that, prices are perfectly elastic in perfect competition market, price elasticity is a measure of the relationship between a change in quantity demanded of a particular good and change its price.
While the disadvantage of consumer from monopoly is high price and low quality, consumer with less income is not be able to buy the product and they may earn lesser profit, the quality of the product is low because they lack of motivation and so it can effect less productivity. Consumers will also not be satisfied and consumer satisfaction is decreased.Second, other firms cannot compete in the market as they don’t have market control and so choices of product are lesser for the customer.Other examples of monopoly include water and electricity supplies from the government.Lastly, they have x-inefficiency,it is the comparison between monopoly and perfect competition in difference, it refers to high price and less production from the firms and consumers are less attracted causing a decreased in amount of consumers for monopoly while less price but high production for perfect competition market.
In conclusion from above, the consumers are always more likely to be supplied by perfect competition than monopoly as perfect competition has more benefit such as low price, creating homogeneous product, price are perfectly elastic and free entry of exits which means that there’s no restriction for firms to enter the market while monopoly is the opposite of perfect competition because it has high price, low quality also x-inefficiency so customers are dissatisfied, it effects the employees too aside from the consumer as they are lacking of motivation from the firms sometimes.
References:
1. http://www.buzzle.com/articles/perfect-competition-examples.html
2. http://www.investopedia.com/terms/p/priceelasticity.asp
3. http://www.ehow.com/info_8384324_advantages-disadvantages-monopoly-economics.html
4. Complete Economics for Cambridge IGCSE & O Level, Second Edition, Dan Moynihan and Brian Titley, Unit 4.4 Competition, page 261 and 263
Felicia Angeline 8A
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Perfect competition is when there is large number of buyer and seller in the market that sell the same type of product (homogenous). The characteristic of perfect competition is that there will be competition between firms with price strategies and non-price strategies who produced the same type of product, product features and brand image will be highly differentiated, and the market shares and profit will vary over time as new business enter the market and inefficient firms are forced to close. While imperfect market such as monopoly is a market that characterized by a single seller only, selling a unique product in the market. Monopoly is characterized by having no competition, but they have many buyers in the market. It is because there is only one firm that doing in that specific product. The example is PLN, because only PLN who provide the electricity for the whole country. There is barriers of entry which maybe artificial or natural, and the product does not have close substitute.
ReplyDeleteThere are several advantage of perfect competition for the consumer that make consumer would always want to be supplied, perfect competition gives the highest consumer surplus because its provide good quality of product with lower price, of course this can make consumer favor perfect competition, because beside the low prices of product, consumer will also get good quality of the product. This can increase the level of consumer satisfaction. There is perfect knowledge in perfect competition that buyers and sellers are well informed well organized and trading is continuous. The other advantage is that the firm act as price maker and both buyers and sellers act as a price taker so no fixed price, because they are the one that will decide the price of the product. Firm in a perfect competition also will operate at the maximum level of efficiency so the consumer get benefited. The product that is sold in perfect competition is homogenous or similar products so it is perfecty elastic. When the price of a product fall, consumer interest will increase. There is also advantage of monopoly, the quality of a product that is being sold in monopoly market is good. The other advantage is in monopoly market, the price are stable most of the time, it because there is only one firm involved in the market and this make them to tend to be elastic.
The disadvantage of perfect competition is that there will be absence of production choice which consumer get the limit choice of a production, as a result there will be less number of new and innovative product. Perfect competition also result in damage the natural environment. For example, they will have no enough money to control their waste and dangerous gas or even chemical substance. Monopoly also have several disadvantage, which they will sell their product in very high prices with low quality of product. This give the consumer very low level of satisfaction which can reduce the consumer surplus. Monopoly market will provide less choice of product to the consumer. In monopoly, really, the one that get benefited is the firm itself most of the time. Monopoly also restricting output onto the market. Monopoly also will exploit consumer. There are indeed no competing products and as a result the consumer gets a raw deal in terms of quantity, quality and pricing.
ReplyDeleteIn conclusion, both perfect competition and monopoly market have their own advantages, but in most of the time, consumer want to be supplied by perfect competition because they will be more benefited. Monopoly also have greater disadvantage for the consumer that make them want to be supplied by perfect market.
References :
1. http://answers.yahoo.com/question/index?qid=20100219234954AAq3ued
2. http://www.ask.com/question/disadvantages-of-perfect-competition
3. http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
4. http://www.whatiseconomics.org/microeconomics/perfect-competition
5. http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
originality : 98% unique (http://smallseotools.com/plagiarism-checker/)
vienetta christina 8a
First of all, Perfect competition is the situation prevailing in a market in which buyers and sellers are so 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. And 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. Or monopoly is characterized by an absence of competition, which often results in high prices and inferior products. Monopoly is the extreme case in capitalism. Most believe that, with few exceptions, the system just doesn't work when there is only one provider of a good or service because there is no incentive to improve it to meet the demands of consumers. Governments attempt to prevent monopolies from arising through the use of antitrust laws.
ReplyDeleteThe advantages of perfect competition for consumers is first, Lower prices for consumers. Second, A greater discipline on producers/suppliers to keep their costs down to make consumers satisfied wih their prices. Third, Improvements in technology. with positive effects on production methods and costs. Fourth, A greater variety of products (giving more choice to consumers). Fifth, A faster pace of invention and innovation. Sixth, Improvements to the quality of service for consumers. Last, Better information for consumers allowing people to make more informed choices. and the advantages of monopoly are, first, economies of scale. If there is no economies of scale, there will be no production. But if economies of scale is achieved, it will increase the production. And it's controlled by government. Second, Research and development. Which they can produce new product to make their consumers satisfied. Third, quality. Forth, easy for government to control. Which the government can increase the public funds.
The disadvantages of perfect competition for consumers are, first, insufficient profits for investment. Second, lack of product variety. So consumers has limited options or choices to choose what product they want. Third, lack of competition over product design and specification so they have limited quality, means they have limited options. Fourth, unequal distribution of goods & income. Fifth, externalities such as pollution. Which can affect consumers. Such as their health. And the disadvantages of monopoly are, first, high prices. Which monopoly is a price taker. The owner can choose any prices they want. So they can make their prices low or even high. Second, less consumers choice. which if the owner lack of skill and knowledges to produce new goods, they will have limited product and consumers will have limited choices. Third, X inefficiency. Which in monopoly there will be high prices and low production. But in perfect competition there will be low prices with high production. And last, quality. Which means the owner having lack of motivation.
In conclusion, consumers would always want to be supplied by firms in perfect competition rather than by a monopoly because monopoly is a price taker. which they can choose their own prices either high or low prices, and consumers will have limited or lack of choices. But if in perfect competition, there will be lower prices for consumers and they will keep the cost of the product lower to make their consumers feel satisfied. So that's the reason why consumers want to be supplied by perfect competition rather than supplied by monopolies.
References :
-http://www.investopedia.com/terms/m/monopoly.asp
- http://www.tutor2u.net/economics/content/topics/competition/competition_importance.htm
- http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure
- http://www.economicsonline.co.uk/Business_economics/Monopoly.html
- Economics lecture book
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Celia Pricilla Mesatania 8A
Perfect competition is a firm that compete in a market that sell homogenous product where consumers can have more product to choose and have a different prices for each products. Consumers will like to have a lot of products but with different product quality and prices which is provided by different firms. Different from monopoly where there is only one single firm in the market that sell the product and the other firm wouldn’t want to compete with them because they have the demand by the people and without the product is hard for people to live, the example is electricity. A monoply have a cheap price because it is usually a government firm but the quality that is sold is low because there is no motivation for the firm to increase their quality, it is because there is no competion or competitors to compete with them. So people will usualy purchase the product in perfect market with many choices of picks of products. People want to be supplied of product by perfect competitions because the quality of product they can achieve is very high and the price of the product will be low this will be profitable for the consumers and loss for the firm because if they still give the product with high price they will loss the demand of the product because the other firms have the homogenous product and have lower price and this makes people to purchase from the other firm then from his.
ReplyDeleteThe conclusion is I will choose to be supplied by perfect competition because it can satisfy our needs and want with not a very high price but have the higher quality rather than by a monopoly where it is a government firm which provides low cost but lowa quality of goods.
Reference:
1. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopoly%20and%20perfect%20competition
2. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopoly
Robin 8a
Originality 100%
In economics, perfect competition (or pure competition) describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Generally, a perfect competition market exists when every participant is a “price taker”, and no participant influences the price of the product it buys or sells. Monopolies exist when a specific person or enterprise is the only supplier of a particular commodity. Monopolies are thus characterized by a lack of economic competition to produce the good or service and lack of viable substitute goods. When not legally obliged to do otherwise, monopolies typically maximize their profit by producing fewer goods and selling them at higher prices than would be the case for perfect competition.
ReplyDeleteA perfectly competitive market have characteristics such as they have a lot amount of buyers and sellers, no barriers to entry nor exit, good share of information, no transaction costs, profit maximization, and they have homogenous products. A lot amount of buyers and sellers means that they have a lot amount of consumers that is willing to buy a product at a certain price, and they have a lot amount of producers that is willing to supply a product at a certain price. No barriers to entry nor exit means that any companies that want to join another company in perfect competition is allowed, and are also allowed to exit too in a perfectly competitive market. Good share of information is that it is guaranteed that all buyers and sellers know the price, utility, quality, and production methods of products. It means that the information is already clear to both the buyer and seller. No transaction costs means that buyers and sellers do not include costs in making an exchange of goods or products in a perfectly competitive market. Profit maximization means that the firms are guaranteed to sell their goods or services where the cost meets the revenue, and will create a profit. Homogenous products means that the consumers have a variety of products to choose from, and those product’s qualities and characteristics are all different because the one who sell it are all different suppliers, but the type or kind of the product is more or less the same. Resources will also not be waster through advertising because products are homogenous.
In the short run, a perfect competition markets are not productively efficient as output will not occur where marginal cost is equal to average cost. They are allocative efficient, as output will always occur where marginal cost is equal to marginal revenue. But in the long run, a perfect competition markets are bot allocative and productively efficient. X efficient is when competition between firms will act as a spur to increase efficiency. A perfect competition can sometimes have boring product choices if they don’t have any idea again. It is true that they have homogenous products but sometimes it will be boring if the product that they sell is that product again and again. In a perfect competition, if the fail the competition or loses it, they can get a great loss or only a minimal profit. Also, a perfect competition will not go for technology development and they will be no economies of scale. Sometimes, changes in production will even result to losses. Perfect competition is where all markets will provide more or less the same product with more or less the same price. Which make them compete and none of the markets will win the competition, especially if they do something to attract more customers or consumers. Another disadvantage is normal profit in the perfect competition market means that the consumers are getting the lowest price, so it is a bit hard to do profit maximization.
ReplyDeleteNow I will be talking about monopoly. A monopoly is one of the types of imperfect competition. It have some characteristics like they will do profit maximization, they are the price maker, high barriers to entry (unlike perfect competition markets), they only have a single seller, and they can do price discrimination. Of course, all markets want to maximize profits, including monopoly. Monopolies will maximize their profit by increasing the price of its goods or services and lowering the quality, like the resources or raw material they need to make the product. They are their own price maker, they decide prices of goods or services to be sold, and do so by determining the quantity in order to demand the price desired by the firm. High barriers to entry are it is hard for other companies to enter monopolies, nor exit it. A monopoly only has a single seller of all the goods and services that produces all the output. Because of that, the whole market is being served by a single company, and the company is the same as the industry. Price discrimination is when a monopolist changes the price and quality of the product. It will sells more quantities charging the consumer less price for the product in a very elastic market and sells less quantities and charging the consumer high prince in a less elastic market.
ReplyDeleteSo in conclusion, it is true that consumer would always prefer to be supplied by firms in a perfect competition market rather than monopoly. Because in a perfect competitive market, they can choose from many products while in monopoly, they only have limited choice or even they only have one choice (example like PLN is the only company that provides us with electricity). A perfect competitive market also have normal prices than monopolies, monopolies will make the consumers pay a lot amount of money for their products, so that they can make profit maximization. Sometimes also, monopolies will provide a very expensive product with a low quality (example if we watch a channel from a television, sometimes it will be suddenly blur or hang because of the low quality, and sometimes if we ran out of electricity like we got blackout, it is because of the low quality). Monopolies will also charge us for the whole television media when we only want to watch one kind of channel. So from the reasons above, I agree that a perfect competitive market is more preferable than monopolies.
References:
http://en.wikipedia.org/wiki/Perfect_competition
http://en.wikipedia.org/wiki/Monopoly
http://www.ask.com/question/disadvantages-of-perfect-competition
http://www.economicshelp.org/microessays/markets/efficiency-pc/
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Audrey Tan 8A
In perfect competition market, there will be larger number of consumers want to buy the product, and also, larger number of different firms in the same stage compete to supply product. Whereas a monopoly, there will be a group of businesses acting together to control market supply of a product and with the power to specify the price of a market. And a pure monopoly controls 100 % of product supply to a market.
ReplyDeletePerfect competition can be more beneficial for consumers than monopoly. It’s because of some reasons, first, monopoly has few or no competitors it may provide a poor service, fewer goods supply, and higher price is charged. And in perfect competition, we can have more supply of goods, and it has many competitors so they can have more quality services. Second, in monopoly, they offer lesser consumer choice. It means that only in one firm we have choice. Whereas in perfect competition, they have more customer choice, so can select from some firms and choose the best as what consumer needs. Third, monopoly may fail to develop new and better products. It’s because of doesn’t need to compete with other businesses and they think that they will not out of market because of less qualitative product. And in perfect competition, we can see lots of innovative product.
However, on another hand, monopoly can be more beneficial for consumers where perfect competition cannot have. It’s because of some reasons, first, monopoly may be more efficient than smaller firms. It’s because of its scale of production. Cost savings may be passed onto customers in lower prices. Second, a monopoly may still charge low prices because it fears new firms would otherwise be attracted to enter the market it dominates and compete for its sales. Third, a monopoly may still face competition from business overseas or from businesses selling similar products. Fourth, a monopoly business may re-invest some of its profits in new inventions and better products. It’s because of the profits it could earn from these will not be completed away.
So in my opinion, perfect competition has its advantages and disadvantages, also in monopoly. However, consumers can be more benefited and fulfilled by perfect competition, other than monopoly.
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References:
1. Complete Business Studies for Cambridge IGCSE & O Level, Brian Titley, Unit 1.4.4 Competition and Business, page 101, 103-105
2. Complete Economics for Cambridge IGCSE & O Level, Dan Moynihan and Brian Titley, Unit 4.4 Competition, page 261
A monopoly and a perfectly competitive market are two contradicting market structures. A monopoly happens when a single firm has complete control over the supply of a good or service. In a monopoly, barriers to entry must be present, causing new producers to be unable to enter the market.Therefore, the monopoly is able to operate on its singularly in its market. Monopolies usually produce in a small volume and charge high prices. Many monopolies are natural monopolies, which is a type of monopoly that exists because of very large start up costs. For example, the railway industry is only owned by one firm because the cost of constructing rails and buying trains are very expensive. The high capital cost is usually a deterrent for entry of new competitors. Although monopoly exists in varying degrees (due to copyright, patents, access to technology etc.) currently there is almost no complete monopoly in the era of globalization. Perfect competition is a market situation where there are many sellers and buyers for a product or service. In a perfect competition, goods sold by all firms must be identical or homogenous, which means that each good is a perfect substitute of another good, buyers have complete information of the product sold and the prices charged by every firm, each firm must have a relatively small market share, all firms cannot set their own prices or demand drops to zero – they are all price takers, and that there is a freedom of entry and exit for all firms in the market. Perfect competition can also be referred to as pure competition. Perfect competition does not exist in real life. It is a theoretical market structure that is used as a benchmark as to compare the real life market structures.
ReplyDeleteOn one side, consumers would prefer being supplied by firms in a perfectly competitive market because in a perfect competition, all firms are not able to charge any price higher than the equilbrium price (price agreed between buyers and sellers) or the demand for their product will drop to zero. The prices reflect the supply and demand of the product. There are no barriers to entry for a new competitor to enter the market, therefore if in any case a firm is able to make excess profits, new competition would drive its profits down to a minimum. When a firm makes abnormal profits, competitors would be attracted to enter the industry. This will lead to an increase in supply, lowering prices. Therefore, consumers are able to buy goods with a cheaper price. Perfect competition encourages efficiency of firms so they would stay in business, but not more. Firms that are not efficient enough will be forced to shut down. The shutdown point of firms in a perfect competition is if revenue is less than total cost or if price is less than unit cost. Efficiency in firms would lower their costs. So they can once again provide goods to consumers with a cheaper price. In a perfectly competitive market, consumers have perfect knowledge of the goods or services they are about to purchase and they are able to make rational decisions based on the information provided. Consumers are well aware of the price, quality, utility and production methods of the products. Consumer satisfaction would increase if they made informed decisions. In a perfect competition, maximum consumer surplus is present because the firm is unable to set their own prices.Consumer satisfaction and economic welfare would increase.
Consumer surplus is the difference between the price consumers are willing to pay and the actual market price for a good. An increase in consumer surplus due to the fact that consumers pay less than they are willing to is an actual increase in the real income and welfare of the consumer because they are able to consume more of other commodities. In a perfect competiton consumers have more choice as there are many firms supplying the product. In a monopoly, however, firms have complete control over the supply and price of the good or service because it has no competitors. Therefore, a monopolist firm would usually charge high prices and produce low outputs to keep prices high. These are both disadvantageous to consumers as they would need to pay high prices and a
ReplyDeleteless number of consumers can receive the product. A monopoly may also produce goods with low quality, but consumers are forced to pay high prices for low quality goods and services simply because there are no substitutes available. For example, the electricity-supplying company PLN do not provide good electrical supply (e.g. blackouts often happen) but all Indonesians use it because no other company provides electricity. The level of customer service would often be low in a monopoly, as they know that consumer loyalty would not fall even if they have bad service, as there is no other competitor.
On the other hand, monopolist firms are actually more beneficial than perfectly competitive firms. Monopolies are usually large and therefore has a substantial amount of capital to invest in research and development, which would lead to new, innovative products that would be useful to consumers. Just because a monopolist firm is the only major firm in its market, it does not mean that they are stagnant and not developing new products. The threat of having new competitors coming into the market is enough to urge them Google is a good example. Even though it is the leading internet provider, but it is a very innovative firm, inventing products such as the Google Glass. Consumers can endulge in having modern products that would help them in their daily lives. Monopolies may also use price discrimination to benefit consumers in poorer areas. For example, a textbook printing company may sell its textbooks for a lower price in Ethiopia than in the UK. Therefore, poorer consumers are able to take advantage of low prices and will be able to own that product. Monopolies may reach economies of scale, so they can have lower average costs. This advantage can be passed on to consumers in the form of lower prices. Government owned monopolies can also benefit consumers with lower prices because of subsidies, such as the water supply company PAM and gasoline company Pertamina. Perfect competition is also not as efficient as thought. As firms only have a small market share, they are unable to grow very big and earn abnormal profits. They are not able to buy new machinery to increase production efficiency and their production costs remain fairly high. They are also not able to do research and development to create new products or develop existing ones because they do not have enough capital to do so. Products in a perfectly competitive market are standardized. There are no perks of buying a product over another. There in an absence of product choice for consumers. Product differentiation is very important in industries such as fashion and cars. Firms would have perfect knowledge of every other firm’s activities in a perfect competition. Therefore, without a patent system, it is no incentive to develop new technology as it will be shared with the other firm.
In summary, both perfect competition and monopoly has its benefits and disadvantages. However, since perfect competition is only a theoretical market structure, then it is impossible for consumers to be supplied by perfectly competitive firms. The second best would be a regulated monopoly, because even though the monopoly can set high prices, it will only set prices according to consumer demand.
ReplyDeleteResources:
http://en.wikipedia.org/wiki/Perfect_competition
http://en.wikipedia.org/wiki/Shutdown_(economics)
http://www.economicshelp.org/microessays/markets/efficiency-pc/
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