Grade 8C 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
- 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
Before anything else, we need to know that a perfect competition and a monopoly don’t actually make a very big difference. They both are markets and they both sell goods. But still, people prefer a perfect competition rather than monopoly. So I’ll be discussing the different reasons of why people choose perfect competition.
ReplyDeleteSo a perfect competition usually occurs when firms and consumers are price takers. And this occurs between many firms with large number of buyers. They sell homogeneous (same) products. And that’s why theres a competition between them. Besides, they need to have perfect knowledge in order for them to make improvements over time. A perfect competition has free enterance, and of course free exit. Firms who’d like to enter will just enter and join the competition without needing to have permission from anyone. And when they’re tired of struggling to attract the most number of consumers, they can just quit. One more thing is that they don’t need any intervention from government.
On the other hand, a monopoly has large number of consumers. But, theres only one seller in each market. They do need to have perfect knowledge too, but they don’t actually have competitors. The bad thing of being inside monopoly is that the barriers of entry. Whenever a firm wants to enter a monopoly, they need to have different permissions. A large scale of production is also one of the barriers of entry. If they don’t have much capital to make a large scale of production, the market will be unstable and unattractive. The firm also needs to do the ‘predatory pricing’ strategy, where it lowers the price in order to get more consumers. Its even better if the firm can lower the price and higher their cost of production where the outputs will also increase. A good firm will publish its product by advertising to attract consumers. But the main problem is whether the firm has enough cost or not. But some firms have already had their own costumers and the loyalty of the consumers will help a lot.
So after I described these two types of competition, we can see which one will people favour more. People choose perfect competition with reasons. They don’t just choose which one sounds good, they still think of it. And besides, not all the people choose perfect competition, some still choose monopoly. So lets see the reasons.
ReplyDeleteFirms competing in a perfect competition tend to lower their prices as low as possible. They do this to attract consumers all time. Consumers love this strategy because if they keep selling the same product and tend to lower the prices, consumers will be able to purchase the product with the lowest price. Heres an example : mobiles in Jakarta have a very high price at first, not many people can afford to buy the mobiles with that price. As the competition occurs and the price keeps going down, there more people can purchase.
Firms in perfect competition don’t make abnormal profits. The profits will not make a very big difference with the cost to produce. So this means the higher the price of the product, the better the quality because the firms spent higher cost. So a perfect competition offers consumers the best price not only based on the cheap or expensive, but also based on the quality.
Next, we should also know that in price determination is controlled by the price setter and the firm is the price taker. The firms aren’t the ones that set prices. They don’t have any power to set the prices. Any firm operating in the perfect market environment will try to maximize its profit by adjusting its output. A firm in a perfectly competitive market will be said to be at equilibrium when it has no trend to increase or decrease the levels of output and they are said to have the maximum profit.
On the other hand, by consumers choosing perfect competition doesn’t mean that a monopoly doesn’t have benefits to the consumers. Based on my research, monopoly is divided into 2 types, good and bad. the good one is based on the best price, and the bad one is the one with government invention. The one we’ll be discussing is the one with government invention.
A monopoly can sometimes make high profit. This is a disadvantage yet an advantage for consumers. Because by increasing their profit, they can actually increase their cost and therefore can produce a new product with better quality. The better the quality, the less possibility of product to be easily broken. This is an advantage because, lets take an example that a consumer purchased something with very very low price. The quality of this specific product will of course be less than expensive products. The lower the product, the faster the product can break. There, when the product is broken, ofcourse the consumer will need to buy a new one. Then, it will cost twice from the first price when he/ she purchased. On the other side, if they purchased a more expensive one before, then they wouldn’t need to buy a new one that fast. Because the higher the quality then the less possibility of breaking the product will have.
But the statement that states that monopoly has more disadvantages for consumers is true. Firstly, price is the most important thing in a market. People don’t choose a more expensive product. Secondly, there can still be diseconomies of scale where the firm will increase the cost and eventually affects the price to increase. This is an advantage though for the firm. Yet, not for the consumers.
Well from all these discussions we may see that the thing that really affects demands from consumers is the price. No matter how good the quality is, how bad the product is, they still favour the product with low price and the product where they think have a worth it price.
Originality: 90%
ReplyDeleteSources:
http://www.economicshelp.org/blog/265/economics/are-monopolies-always-bad/
http://www.google.com/url?sa=t&rct=j&q=perfect+competition+benefits+for+the+consumer&source=web&cd=1&ved=0CCYQFjAA&url=http://answers.yahoo.com/question/index%3Fqid%3D20110204114332AAMJg2o&ei=7A0kU9u6IYKErQfHnYHAAw&usg=AFQjCNHnhm5G5p65smW_fugLVCP8QnGNNg&sig2=RLrZ2moW8I4yyOKwC_AVgA
http://www.google.com/url?sa=t&rct=j&q=perfect+competition+benefits+for+the+consumer&source=web&cd=4&ved=0CEQQFjAD&url=http://www.ask.com/question/benefits-of-perfect-competition&ei=7A0kU9u6IYKErQfHnYHAAw&usg=AFQjCNFPYsT6e4h--xxGdpcn3s8e2BWnxg&sig2=mWcOFiXul4CCCWnZbjgbAQ
B, Good Jacqueline,
DeleteYou have put in lot of efforts to do this task. In introduction you have said no difference in both the market where later you are showing a big difference. Be careful for these contradictions.
2nd in this answer you should present from the point of view of consumers.
Perfect competition is the condition in the market where there are many firms in the market and all firms have a relatively small market share. Usually, in perfect competition, all firms provide identical goods. However, monopoly is the condition in the market when only one firms controls the market and people will only buy the goods and services provided by that firm.
ReplyDeleteFirms in perfect competition will provide consumers with better goods and services because they are competing with each other to have more consumers/customers. The firm with the best quality will have the most number of consumers. Also, the firm will give cheaper price to attract customers to buy their products. Firms that set up high price will have loss because there will be no customers that want to buy their goods and services. In perfect competition, firms are price takers which means they cannot control the market price of their products. Sometimes, customers can even bargain with the seller to get lower price. So, consumers are at advantage when they are being supplied by firms in perfect competition.
However, the firm that monopolies the market will set up high price of their goods and services. Even though its expensive, people must buy the goods because of some reasons. The reasons can be because of there are no other choices or because it is really needed by the people. Also, the quality of their product is low. This is because there is no competition in the market. Even though the quality is low, consumers will still buy it at high price. So, consumers are at disadvantage when they are being supplied by firms in monopoly.
The conclusion is consumers will want to be supplied by firms in perfect competition. This is because they will get advantages of high quality and low price if they are supplied by firms in perfect competition. If they are supplied by monopoly firms, they will only have disadvantages of low quality and high prices. So, consumers will always want to be supplied by firms in perfect competition.
Originality: 95%
ReplyDeleteSources:
-Notebook
C, Well done Alfred,
DeleteI appreciate your hard work. Here in this question you should present from the point of view of consumer as which firm they would prefer perfect or monopoly.
Conclusion should also be very strong in language providing a straight decision what consumer prefers out of two market.
Perfect competition is when there are many firms in the market and they compete each other for survival. Monopoly is when there is only one producer that controls or have many costumers in the market, it controls the market because of some reasons (High barrier to entry, profit maximiser). Perfect competition provides informative goods/identical goods. Other than survival, firms also compete to increase sales and profits.
ReplyDeleteGood quality of goods will be provided to the consumers or costumers in perfect competition market, because firms are competing to have more costumers and to increase economies of scale. Firms with the best quality goods will have more costumers and it will be more popular to the people. Firms that give cheaper price for their goods will also attract many costumers, but it is also depends how well the quality of the good is provided In perfect competition. Firms that give very high prices/prices above the average will gain loss because the price is too high for the people to buy the goods.Firms in a perfect competition are called price takers which means they cannot control the price of their goods in a market. The one who is controling the price and the demand for a good is consumer, why?, because the producer will supplied goods for the consumers depends on their demands, and consumers will choose rather to buy or not the goods because of the price (high or low).
Firms in a monopoly market will set the goods at high prices. They also provide low quality of goods, because there is less competition in a monopoly market. Consumers will still buy those low quality goods with high prices because they are in need for those goods. This brings disadvantages for the consumers, but bring benefits to the firm.
So in conclusion, consumers are more benefited if they buy goods from a perfect competition in a market because thay can get good quality of goods with low prices due to competition between firms. They will get disadvantages from purchasing of goods in a monopoly market because firms in a monopoly market sell their goods in high prices and low quality.
Originality : 86%
Resources :
Notebook
IGCSE Economic book
http://en.m.wikipedia.org/wiki/Monopoly
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
B, Good conclusion as why consumer prefers the perfect market.
DeleteIn the text body part you should refine you language and make it from consumers point of view.
I appreciate your work, good work keep it up
There are 2 types of market structure, first is monopoly and the second one is perfect market. The definition for monopoly is when there is only one firm or compkany that sell that type of goods or we can say as the only firm in that particular market, so customers have no other choice than buy from that company. if the definition of perfect competition is there are many producers and consumers in a market and the prices are different between each other, because everyone want to have the most number of customer by lowering their prices.
ReplyDeleteThe advantages of monopoly is first, monopoly can avoid the duplication and the wastage of product , the second advantage is bevause there is only one company thay rule the market, so that company can keep doing research and development, so that the firm can still be the ruler of the market. The third advantage is because of it is the only company in the market, so it can increase and decrease the price as they want because their customer will not decrease also because the customer dont have other choice than buy from that company. The forth advantage is because of much profit, the company can buy the latest machinery that really efficient. The disadvantages of monopoly is poor level of servive, the cosumer will get poor level of service because the company will not think about their customer satisfaction anymore, because all they know is that the customer will keep on buying and buying. The second disadvantage is the customer can be charged at a really high price but with a really low quality of the products. The third disadvantage is no consumer sovereignty, a monopoly market can be called as customer exploitation also , ofcourse there are nocompeting products and as the results the buyer will get a raw deal of quality, quantity, and pricing. the forth disadvantage is lack of competition can make the company the company to give low quality products and outdated goods and services.
The advantage for perfect market first is they will make the most efficient product, so it can compete with the other companies. The second disadvantage isThere is no information failure as all knowledge is spread out evenly. The third advantage is Only normal profits made just cover their opportunity cost. The forth advantage is Maximum consumer surplus and economic welfare. The disadvantage of perfect market is No Scope for economies of scale because of the high number of firms in there. The second disadvantage is Undifferentiated products- all homogeneous. Important in industries like clothes and cars. The third disadvantages is Lack of supernormal profits may mean the investment of Research and Development(R&D) is unlikely. Important for industries like pharmaceuticals. The forth disadvantages is With perfect knowledge there is no incentive to develop new technology because of the ability to share information.
the conclusion is that With the advantages and the disadvantages of both monopoly and perfect market we can see that customer will of course choose the perfect market.
Based on smallseotools.com uniqueness: 97%
Sources: -http://en.m.wikipedia.org/wiki/Perfect_competition -http://en.m.wikipedia.org/wiki/Monopoly -http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly -http://www.economicsguide.net/mv/tutorials/the-private-firm-as-producer-and-employer/advantages-and-disadvantages-of-monopoly/ -http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
C, Well done William.
DeleteGood to see that you have put in lot of efforts to complete this task. I would like to give some suggestion to improve the answer.
1) In this writing we need to see from whose point of view we are explaining which is in this case consumer.
2) You wrote in general format. We should be specific regarding our explanations.
3) Need to have strong conclusion in the light of reason we have explained and its must refer to one side.
4) Its very important of proofread ourself and take the help of many websites for spelling and the possible grammatical mistakes.
In economic theory, perfect competition describes markets that no company is large enough to have market power to set the price of a homogenous product. Because the conditions for a perfectly competitive market are strict, there are only a few perfectly competitive markets. But still, buyers and sellers in some auction based markets, say for commodities or some financial assets, may approximate the concept. Generally, a perfectly competitive market exists when all participants are "price takers", and no participant influences the price of the product it buys or sells. Specific characteristics may include:Infinite buyers and sellers – An infinite number of customers with the willingness and ability to buy the product at a specific price, and infinite producers with the willingness and ability to supply the product at a specific price.No barriers of entry and exit – No entry barriers, and exit barriers makes it easier to enter or exit a perfectly competitive market.Perfect information - All consumers and producers are assumed to have knowledge of price, utility, quality and production methods of products.Profit maximization - Firms are assumed to sell where marginal costs meet marginal revenue, where the most profit is earned.Homogenous products - The qualities and characteristics of a market good or service does not vary between different suppliers.Non-increasing returns to scale - The lack of increasing returns to scale ensures that there will always be a sufficient number of companies in the industry. In resut of a perfectly competitive market, a firm's demand curve is perfectly elastic. But, In contrast to a monopoly or oligopoly, it is impossible for a company in a perfect competition to earn economic profit in a long run, which to say that a firm cannot make any more money than is necessary to cover its economic cost. In order not to misinterpret this zero-long-run-profits, it must be remembered that the term 'profit' is also used in other ways.So, why consumers prefer to be in a competitive market than in a monopolistic market? It is because the quality of products are similar between producers, cusromers have perfect information of what they are trying to buy, and consumers will spend less on products, because firms will try to compete in the market for price, and will constantly reduce prices to attract consumers attention.
ReplyDeleteSource: http://en.m.wikipedia.org/wiki/Perfect_competition
Originality 87%
c: Mathew,
DeleteYou should follow the discuss format. Better to be systematic in writing essay type questions.
A monopoly exists when a specific person or enterprise is the only supplier of a particular product. Monopolies have a character of a lack of economic competition to produce the good or service and a lack of viable substitute goods. Perfect competition is a competition in which many firms provide or compete to provide identical goods or services and equally many buyers or customers want to buy their products. In perfect competitions, no seller has enough power to set their own prices or influence the price on the market but those in monopolies have these rights to do so.
ReplyDeleteEach of these kinds of competitions have their own strengths and weaknesses. In monopolies, firms can restrict 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.Monopoly has a guarantee that their products wouldn't be duplicated, these firms also enjoys the economies of scale as it is the only supplier of the product.
However, by restricting competition from rival producers and products, consumers or customers will have less options of goods or services to choose from than would occur in a competitive market. Consumers faced with few alternative choices may simply have to continue buying the product of the monopoly or go without the products, these make lower output to the company and higher prices for the consumers. A firm may also reduce the product quality in order to cut its cost of production and increase their profit margins this is a loss for the customers. Furthermore, because monopoly has a little competition and earns abnormal profits, it may make less effort than a competitive firm to ensure that its resources are used in the most efficient way. This means there will be inefficiency and there is a higher cost in the production, because of the lack of competition. In monopoly, they need some regulations in order for them not to act against the public interest. Now there are many governments already that give the regulations so the monopoly firm wouldn't give too high prices.
Some examples of monopoly markets include electricity monopolized by PLN, or highways roads monopolized by Jasamarga; while some examples of perfect competitions are grocery stores, butchers, fish mongers, street sellers, and sellers in the traditional markets.
However there are also the drawbacks and advantages for the perfect competition. Perfect competition firms can't set their own prices, they don't have the power to influence the market price, they are all price takers. If they try to increase their prices above the market price, it would lose custom to rival producers and soon will go out of business or bankrupt. They also can't lower their prices below the market price without losing money unless it is able to produce in a lower cost of production.
The consumers can choose more choices of goods in a perfect competition market but not in a monopoly because the firms in perfect competition will keep on producing better quality of products to compete more and get more customers such as Apple and Samsung. Firms will also be very very efficient in producing their goods and services. Because perfect competition has a high level of competition, it may make more effort than a monopoly market to ensure that its resources are used in the most efficient way. This means a perfect competition may be managed efficiently and production costs will be lower. This efficiency is caused by organizational motivation due to a high level of competition.
In conclusion, consumers will prefer to choose perfect competition market because there is more choices of firms, so the firms can not play with the prices, so we can get better prices or cheaper prices. All consumers will choose firms with the lowest price available with same quality of product, so whoever firm will increase their prices more than the market price, they will soon be bankrupt and will close the business if they are not generating any profits.
100% unique content
DeleteReferences:
- http://en.wikipedia.org/wiki/Monopoly
- http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
- Economics book
A: Good work Fernando.
DeleteIn a perfect competition, the firms are called the price taker. Where in there are large number of producers and buyers, the firm is the one controlling and setting the prices of the goods and services. All the goods in perfectly competitive market are substitutes. In monopoly, however, there is no competition in the market. There is a high degree of product differentiation in a monopolistically competitive market.
ReplyDeleteConsumers would prefer to be supplied by perfect competition because of several benefits that can be passed down on to consumers. These benefits include lower prices, through this consumers are able to obtain the goods and services they want in lower price. This is also because of many competing firms, all of them strive to increase the demand of goods. Perfect competition also has a wider range of products and more variety of goods, partly because the prices are not as high as those in monopoly.
In a perfect competition, rapid change is possible to meet new consumer demands, it is very flexible. Consumers would prefer this benefit because they can have more chance of obtaining the goods and services demanded from perfect competition. A faster pace of invention and innovation because of the competition between firms therefore each firm will be more innovated in inventing new and better products. There is also better information for consumers allowing people to make more informed choices, more competition means more information given to the consumers about the products because all of the competitive firms would want their consumers to be interested and buy the products.
Not to be mention, there yet to be disadvantages of perfect competition aside from its advantages. No economies of scale is possible because all the firms are too small unlike monopoly. Industries with high fixed high costs would be particularly unsuitable to perfect competition. It produces what is demanded under the given distribution of income, so with the profits they made they will try to produce according to consumers’ wants and expectations from them. Little or no research and development is possible because there are no funds for it. Under perfect competition there are no surplus profits, research and development is possible under monopoly because of the surplus profits available.
Spillovers and externalities can also exist within a perfect competition. These are costs caused to others such as the disposal of nuclear waste or toxic chemicals from factories by dumping them in streams or rivers or lakes. Perfect competition is consistent with a limited choice of range of goods, different with monopolistic competition which may have a much wider range. Undifferentiated products are boring giving little choice to consumers, while differentiated products are very important in industries such as clothing and cars. The lack of competition over product design and specification might also include in the disadvantages of perfect competition due to the lack of product variety.
On the other hand, reasons why consumers do not prefer to be supplied by monopoly include the reduction of quality of the products, reduction satisfaction of the consumers and increased prices. Company that has a monopoly will buy cheap materials to reduce the total cost of production and this will reflect on the quality of the product. So by using cheap primary materials and opening few stores to repair products, monopoly reduces the quality of its product. Because monopoly cause no choices for the consumers and may cause bad service, the satisfaction of the customers will be reduced. In order for companies to increase their profit and follow the provider prices, the monopoly cause increased in prices. These factors might result consumers to not prefer monopoly compared to perfect competition.
ReplyDeleteHowever, there are also opinions supporting monopoly such as monopoly may help the company to import their products and compete with foreign companies. Because the companies that have monopoly usually make a lot of profits, they can produce more products and import them. A domestic firm may have monopoly power in the domestic country but face effective competition in global markets, such as British Steel, this is international competitiveness. A firm may also become a monopoly through being efficient and dynamic. A monopoly is hence a sign of success, not inefficiency.
Monopoly is known for its high research and development in terms of advantages. They can make supernormal profit, which can be used to fund high cost capital investment spending. Successful researches can be used for improvement of products and lower costs in the long term. This is important for high-tech industries such as aerospace, telecommunications, pharmaceuticals etc. Another benefit of monopoly is economies of scale. This benefit can be passed on to consumers in the form of lower prices due to increased output which will lead to a decrease in average costs of production. It is important for industries with high fixed costs such as steel and tap water production.
In conclusion, consumers are often would want to be supplied by perfect competition because of the benefits that they could enjoy, unlike monopoly which will often charge them higher prices. However, the advantages and disadvantages of both sides have been mentioned and therefore the statement are clearly judged by those factors.
Originality 86%
Resources:
https://www.boundless.com/economics/monopolistic-competition/monopolistic-competition/monopolistic-competition-compared-to-perfect-competition/
http://hamad234.blogspot.com/2007/10/disadvantages-of-monopoly.html
http://www.economicshelp.org/microessays/markets/advantages-monopoly/
http://www.tutor2u.net/economics/content/topics/competition/competition_importance.htm
A* Excellent work Cynthia.
DeleteYou put in lot of efforts to complete this task and studied many articles. Nice use of some of words like spill over effect and externality.
I appreciate you hard working in completion of this essay.
Economists conclude that there are a number of different buyers and sellers in a market. This proves that competition exists, allowing prices of products to vary as an act of respond to the changes in supply and demand. Factors, like the structure of buyers and sellers in the market, pricing power, barriers to entry, product differentiation, etc. are what determines the market’s structure.
ReplyDeleteThere are two main forms of market structure – the perfect competition market and the monopoly market. A perfect competition is described as the theoretical free market situation, which usually exhibits the following characteristics: a great number of buyers and sellers, with homogenous products, wherein buyers and sellers are too numerous to have any control over the prices of the products.
A monopoly market is the exact opposite of the perfect competition. It is a market structure in which a single corporation owns most or all of a given type of product’s market. By definition, monopolies are thus portray as the market with an absence of competition, as he is the sole supplier of the product. Thus, monopolies generally result in higher prices and inferior products.
A perfect competition will most likely benefit the consumers, in terms of pricing, product’s quality, and after sales services. The intensity of competition here allows resources to be allocated in a much more efficient way. It is considered as the most reasonable, or cheapest, way of using the factors of production. This way, it will provide consumers the lowest possible price due to the high degree of competition occurring in this market structure.
In a perfect competition with perfect knowledge, information failure will never take place as knowledge is evenly spread between all parties. A perfect competition would practically assume that all parties are rational with perfect knowledge and information about all products. When all participants (in specific, the suppliers) share the same knowledge about the product, a better quality product will be produced as producers or suppliers are fully aware of the prices, costs, and market opportunities.
As participants have perfect knowledge, consumers will be fully aware of the price, quality, and availability of a particular product. It is believed, that in a perfect competition, consumers perfectly understand the products, at all times. Therefore, it’s considered that consumers will make the best decision regarding the purchase of the product. This obviously benefits consumers, as with their perfect knowledge, they will purchase the best product.
However, a perfect competition may eventually bore the consumers as the products are undifferentiated products, or homogenous. There seems to be an absence of product choices. Product choices are important in industries like the car industry or the fashion industry.
Besides the lack of variety of products, a perfect competition does not undertake research and development, because the products are homogenous and there’s an inadequate amount of profit to be used for R&D.
On the other side of the argument, a monopoly market is commonly considered to have disadvantages, although in some circumstances monopolies may bring benefits to the consumers. Monopolies are most likely to have abnormal profits, considering it is the sole supplier of a product. Such profits can be used to fund research and development. Successful researches will improve the quality of the product and lower the cost of production, in the long run.
ReplyDeleteActing as the only producer, monopoly market reduces product duplication and hence lessens waste of energy. Another benefit of having one producer in a market is that there is stability of prices, which isn’t found in the perfect competition. This is because in a perfect competition, prices vary in accordance to the supply and demand. However, in a monopoly, there is only one firm involved in the market to set the prices of the product.
Monopoly markets are allowed to use price discrimination, which may be considered as both advantage and disadvantage. Price discrimination is charging different rate on the same products to different customers. Such practice is a benefit to the economically weaker sector of the society. By practicing price discrimination, there seems to be potential welfare improvements unto the economically weaker sections.
However, the monopoly market is best known for its exploitation of consumers wherein consumers get a raw deal from a monopoly in terms of the pricing, quality and quantity of the products. Thus it is not a surprise to see dissatisfied consumers, as they are charged very high for low quality products.
Absence of competitors in a monopoly also means an absence in price wars, etc. which may have benefited the consumers. When the duplicate of the product is not available in the market, firms are able to charge very high prices to consumers, even if products are low quality or outdated, because consumers will have to buy from them despite the high prices.
As a conclusion, both perfect competition market and monopoly market have their own perks. Although the monopoly provides more variety of products and all, consumers seem like the perfect competition market better. This is because in a perfect competition, they are promised the lowest possible price for the best possible products and services. There is less chance of exploitation of consumers in a perfect competition, while the chance of being exploited in a monopoly is extremely high.
Anabelle – 8C
Originality (based on smallseotools.com): 98%
References:
• http://tutor2u.net/economics/revision-notes/a2-micro-market-structures-summary.html
• http://www.investopedia.com/terms/p/perfectcompetition.asp
• http://en.wikipedia.org/wiki/Monopoly
• http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
• http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
• http://www.economicsonline.co.uk/Business_economics/Monopoly.html
A: Good work Anabelle
DeletePerfect market is when all firms in the same product category compete. Firms in a perfect market are producing homogenous products. In a perfect competition, firms are price takers. To firms, perfect competition. A perfect competition happens because all companies wanted to gain monopoly. A monopoly is when there is only one producer with many buyers. It is also known as a sole supplier. Its aim is profit maximization.
ReplyDeleteFirms in a perfect competition will set their products with a lower price and always keep their costs down. In a perfect competition, there is perfect knowledge. There is no failure on information or time lag. Knowledge is available to all competitors who will make risk-taking minimal and there will be limited role of entrepreneur. In a perfect competition, there are no barriers to entry or to exit out of the market, what firms produce in a perfect competition are homogenous and identical outputs, which aren’t branded.
Units of input in a perfect competition are homogenous. In a perfect competition, the firm is the price taker, which takes its price from the industry, which means not a firm could influence the market price or conditions. In a perfect competition, there are a very large number of firms competing in the market. There is no government regulation in a perfect competition, except if the government wanted to make the market more competitive. In a perfect competition, there are no external costs or benefits. Firms in a perfect competition can make profit during a long run, but can make abnormal profit in a short run.
With perfect knowledge, there will be no lack of information between competitors. With no barriers of entry, existing firms can’t drive monopoly power. Producers can cover their opportunity cost since only normal profits are made as a result. In a perfect competition, there could be maximum consumer surplus economic welfare.
Monopolies have barriers to entry. There are 2 types of barriers: natural entry and artificial entry. Examples of those natural entry barriers are economies of scale production, ownership of key scarce resource, high set-up and research and development cost. Artificial barriers include predatory pricing and acquisition, limit pricing, superior knowledge, loyalty schemes, a strong brand, advertising, exclusive patents, contracts and licenses, and vertical integration.
Both perfect competition firms and monopoly firms positively supply consumers. Perfect competition gives higher quality product. Firms in perfect competition have more will to produce better quality products since there are a very large number of competitors in the firm. To the firms in a perfect competition, competition encourages efficiency. With the fact that in a perfect competition, firms in a perfect competition will charge consumers with a minimum price for the product without resulting in a loss or in other words, without making the cost price higher than the selling price. This will encourage consumers to buy the product since most consumers and people wants to buy products with low price and high or decent quality.
Firms in a perfect competition do advertisements. This will encourage consumers and also increase information one the product for the consumers. There is an improvement of technology in a firm in a perfect competition. This will increase satisfaction of the product for the consumers, which may encourage consumers to buy their product. Improvement of technology on the product may also increase information of technology for consumers. In a perfect competition, firms in the perfect competition or competitors will have a faster pace on innovation and invention for the product. It is why we see now in our world that with a large competition in the market, technology in our world is increasing rapidly with the existence of a perfect competition. This will increase satisfaction of the product for the consumers.
Firms in a perfect competition will do more advertising those firms in a monopoly. They do advertising to encourage consumers to pick the best product suitable for them. To encourage consumers, firms in a perfect competition also supply a wider range of products for the consumers. Producing or supplying the products in a wider range is to make the consumers pick the most suitable product for them from the firm. Wider range of products will make the consumers more free to pick a product for them. Quality of service for the consumers from the firms in a perfect competition is better compared to monopoly firms.
ReplyDeleteMonopoly firms also supply consumers well. Products from monopoly firms are high quality. The profits they make are mostly used for research and development. Research and development are used to increase quality of product. The product will satisfy people if they pick quality over price. Although with these benefits, monopoly firms will also result in a disadvantage for the consumers too. Monopoly firms will charge higher prices for the consumers since a monopoly firm is a single seller, which means no other firms, sells the product. With a higher charged price, there will be more tax.
Most monopoly firms have government intervention. Consumers will be supplied with a lower range of products by the monopoly firm since there are less will to grow for there is no competition. Firm in a monopoly won’t reduce cost. Firms won’t be very efficient since there is no need for them to reduce their production cost. There is a less motivation for the monopoly firm due to no existence of competition. Less motivation will result in less innovation. Less innovation also includes new products. Most consumers would want to buy products from a growing firm because they will be more satisfied.
In conclusion, according to my research, consumers will be more pleased to be supplied by the firms in a perfect competition rather than a firm in a monopoly because firms in a perfect competition innovate more than a firm in a monopoly. Firms in a perfect competition also charge lower price for consumers and firm in a monopoly charges higher price since they are not reducing cost and aim for profit maximization. Firms in a perfect competition will also supply wider range of goods for consumers to have more freedom on choosing the most suitable product for them, compared to firms in a monopoly.
Kevin 8C
Sources:
• http://www.tutor2u.net/economics/gcse/revision_notes/firms_monopoly.htm
• http://tutor2u.net/economics/revision-notes/a2-micro-perfect-competition.html
• Cornell notebook
• Economics textbook
92% Original
B: Good Work Kevin
DeleteYou have put in lot efforts in completing this task. You seems to provide all information about the competition chapter.
Just write what is required by the question.
First of all we should now what are monopoly and perfect competition. Monopoly and perfect competition are both classified as a market structure. There are 2 types of market structure such as perfect market which also known as a perfect competition and imperfect market which have many types such as monopoly, oligopoly, and duopoly, but in this moment, we are going to talk about perfect competition from the perfect market and monopoly from the imperfect market.
ReplyDeletePerfect competition which have many buyers and sellers, the prices reflected the supply and demand of the product itself, and consumers have many substitutes if the goods or services they wish to buy have a low quality or expensive prices since in perfect competition, the firm are producing the same product with the same quality or better quality to attract their consumers, also the companies in this perfect market should just earned enough profit to survive in business or else, other companies would enter the market and drive profit back down to the bare of minimum.
A perfect competition have some criteria such as all firm are selling an identical product which means each firm are producing the same product with also the same price and quality, all firm are price takers which means firm can not control the price of the goods and services they are producing and the price makers is the industry which reflects teh demand and supply of the product itself, all of the firm in a perfect competition also have a relatively small market share compare to an industry since in a perfect competition there are many sellers so the buyers are spread to each sellers and also in perfect competition, each firm are producing the identical product, buyers have complete information about the product being aold because each firm are producing the same product also the same characteristics and prices are similiar, so consumers may have the information of the product in each firm automatically, and consumers can choose from which sellers they should buy the product may depend on the location of the sellers and consumers, lastly, this perfect competition is characterized as free entry and exit since there is not a large number of barriers that applied, also doesn’t require such an advanced technology and large amount of capital requirement and free exit which means that id business did not find profit, business can easily closed their company and open another type of industry they want to work in.
Oppositely, monopoly is a single company or group owning all of the market since they are the only producer or maker of that type of product. It is characterized by an absence of competition which results on high prices and inferior products.
But unlike perfect competition that does not have a barrier to entry, monopoly market structure have a barriers to entry which are classified as 2 types such as natural barriers to entry and artificial barriers to entry. Natural barriers to entry also have 5 types such as technological which when a monopoly company for example train station uses an advanced technology such as how to control the train, and many other more advanced technology used, also a train station company requires a large amount of capital, it also needed a legal considerations from the government to open their operations, they also must have a historical reasons to have trust from teh consumers or users of the train and they should have a good geographical location where is the right place to open the stations so many consumers are willing to use their services.
A monopoy market strcuture have a characteristics such as one single seller in a market with the absence of competition, there are many buyers of that product since there is no competition, the firm enjoys a large amount of profit, the seller is the price maker in which they are the one who control and give prices to teh particular goods and services that they produce and sell, consumer don’t have a perfect information about that product since there is no competition and rival firm that producing the same product and the same quality, the barriers to entry such as natural barriers to entry and artificial barriers to entry as listed above and lastly the product does not have a substitutes which means even though the prices are high, if consumers really need that product they should buy it because there are no other rival firm that sell the same product and quality also they donlt have any competition of that particular goods and services.
ReplyDeleteThe advanatges of perfect competition is produce homogenous product so consumers have many substitutional of that product, perfect information of that product since there are many company sell that type of product which consumers can make a comparison of that product, no barriers to entry and exit to perfect competition so company can easily enter the perfect competition and if they did not find any profit in it, they can easily exit from the perfect competition and can move to another type of industry they are interested in, they allocate resources in the most efficient way to reduce the expenditure they need to give which will make them can increase their profit or reduces the prices of product they are producing, no information failure since information are spread globally by each firm producing that type of product, the company only earned a small number of profit which will be beneficial for consumers since the orice will be lower, and maximum consumer surplus and economics welfare will be produced.
The disadvantages of perfect competition are no scope for economics of scale because there are large number of sellers of that product which will make each buyers spread over the sellers and make each sellers don;t get a large number of consumers, undifferentiated products since all are homogenous but actually differences of profuct are needed to make a new style in the industry for example many styles of clothes and cars, and also becauseof the small amount of prodit, business unable to do a perfect research and development of the product, and lastly there is no incentive to produce a new technology because the ability to share information.
While the advanatges of monopoly are avoid duplication and wastage of product since they are the only sellers of that particular product, it enjoys economics of a scale since it is the only sellers of that product so all buyers will buy product form tat company and they can have a lage number of buyers and able to have a large amount of economics of a scale which will leads smaller total expenditure since if the company buy more amount of goods from the supplier, supplier will give more discounts to he comapny, since monopoly company earned a lote amount of profit it can be uses for research and development, it may use the price discrimination which beneficial for the weaker section of society in that particular area for example India railways provide subsidied for students taht are using their services, since monopoly company earned a large numbe rof profit, they are able to buy an advanced technology and machinery which also can help them to avoid competition of the product they are producing.
Also thedisadvantages of monopoly are the company will provide a poor level of ervice because usually a company provide a good services to attract consumers, but the monopoly company will think that consumers are coming automatically without them needed to provide a suitable services for the consumers, there will be no consumer sovereignty instead of it the one that got sovereignty is the firm itself, consumers also will charged high prices with low quality of goods and services since firm will find a waqy to earned as many profit as possible with a way of giving a high prices a spossible but producing a low quality of product to reduce the cost of the product they are making which may results on a high profit earned by the company, and lastly lack of competition will lead to low quality and out dated product since firm will feel lazy to think to modernized their product because they think they will still earned alarge amount of profit even if they produce a low quality of product also with an out dated model of product.
ReplyDeleteIn conclusion, perfect competition and monopoly has advanatges and disadvantages but we also can see that the advantages of perfect competition mostly are for the consumers while the disadvantages are for the producer or sellers while in monopoly, most of all we could see that the advantages are for the producer itself or for teh sellers and owner of the company itself while the disadvantages are for the consumers of the product or the buyers of the product.
Originality : 100%
1473 words
Sources :
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://www.investopedia.com/terms/m/monopoly.asp
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
Corner notebook
A: Good work Tiffany.
DeleteYou have put in lot of efforts to finish this task. Proof reading is important to see the spelling and sentence structure.
The difference between a monopoly and a perfect competition is that a monopoly produces a unique product that no other firms can produce and sell. They are the only company in that country, region or area that sells that specific product.
ReplyDeleteWhen a consumer is asked which is better for consuming, a perfect competition or monopoly, then I guarantee they will answer perfect competition. This is simply because a perfect competition provides a cheaper price with a good quality product. There are also various types of products that a perfect competition sells which increases the demand of a consumer.
However, when a consumer is asked which supply of product they prefer, perfect competition or monopoly, it depends. A perfect competition can produce various types of products and there are many different firms producing the same type of product with different utility. It will make the consumer the ability to choose different products and pick out the ones they desire or demand.
On the other hand, a monopoly is also important. It may not be the kind of company that sells cheap products but the products are their needs. For example, water supply, electricity and more. Those are needs that people will need and can’t resist. A perfect competition will usually sell products that are wants, however not needs. But there are different companies that sells water. Such as, specifically in Indonesia, Alfamart, Indomaret and etc. They sell water supply as well, but in smaller portions and different quality. You don’t know how they produce that product and you can’t just buy a bottle of water every day. Which is why there are monopolies. They provide you water supply, electricity or whatsoever every month, and we provide the money.
To begin with, a “perfect” competition is not perfect. Perfectness doesn’t have any disadvantages. A perfect competition have advantages and disadvantages.
First of all, a perfect competition will pursue different pricing strategies that is in the accordance of the type and amount of the competition. Of course, they will face different competitive companies that will try to beat them, and this is what will motivate the workers, managers and probably the whole company.
Second of all, wherein companies want to do their best to compete other competitive firms, they will think of anything to beat other firms. One of the things that they will do is increase advertisement. They will try to advertise different products that they are selling in the market either in the TV, banner or etc. And advertisement is quite expensive, which is why some companies that doesn’t have the enough amount of money to provide advertisements will think of something else to advertise their product.
Third of all, the market shares and profits of a competing business will not be fixed. They will vary over time because net firms may enter the market or their product may not have a high consumer demand.
Last but not least, there will be a large number of different firms and brands that will compete each other. This will increase the motivation to work harder. Managers can decide whether they will use theory X or Y. They can also provide fringe benefits that will motivate the workers in order to make them feel high spirited and enthusiastic to work productively. Not only will this increase their stamina and motivation but also the productivity of the company.
However, a perfect competition will also experience some advantages. One of the advantages is that since there are many firms that are going to compete each other, they may be tempted to mislead their consumers. For example, salesperson usually tend to force or physically push themselves toward the consumers by saying tons of advantages about their products. They will say anything good in order to convince the consumer to buy their products. Which is why, some people get angry after they buy it. For example, my mom was told that this specific light that is produced by a Chinese company is a good quality, therefore she bought it. Moments later, she experienced some difficulties and errors in the light, it wasn’t coming on. After that she decided not to buy any product from a Chinese company ever again. Therefore, salesperson or companies will try to push themselves to the consumers telling them good things about their products. This may not be a good method to sell theri product because it can make the consumer feel untrustworthy about that specific brand or company. And in the end, it may result a decrease in consumer demand.
ReplyDeleteOn the other hand, a monopoly will also have a disadvantage and advantage. In fact, it has a greater disadvantages than advantages.
One of the disadvantages is that it gives the consumer less choice. Since they only produce one type of product, they will be fixed in supplying that product. They will not be producing many different types like in a perfect competition. Also, they will not provide advertisement, discount or whatsoever because they have no competition. In fact, if they are compared with a perfect monopoly, they will have a greater advantage. However, on the other hand, if the consumers were asked to choose which is better that they prefer, then it is perfect competition.
In conclusion, I say it depends. This is because consumers would may prefer products being supplied by a monopoly. As I said before, a monopoly produces and sells products that are needed by people. Those goods are important in their lives and products that they can not resist or ignore. Such as water, electricity, fuels and more. People need water everyday, and even if the price might be pricey, they still need it. However, a perfect competition may also be preferred because they are wants. Such as electronics, toys and etc. People can live without electronics except that we chose to live with it by our sides. In fact, people didn’t have electronics before they were invented, and they seem to be living life happily. Therefore, in my opinion, it depends on the type of consumer. A very wealthy person might prefer supplies by both types of companies, but a not so wealthy person might prefer a perfect competition since it is cheaper.
Reference:
http://www2.econ.iastate.edu/classes/econ101/vandewetering/chapter13notes.htm
http://www.philipallan.co.uk/pdfs/txtecoa209.pdf
http://courses.missouristate.edu/reedolsen/courses/eco165/notes/pc-m.pdf
Economics book
ORIGINALITY -91% according to plagiarism.net
B: You have put in lot of efforts in completion of this task.
DeleteMarket structure shows the linked characteristics of a market. A market structure features the number of firms, type of product, barriers to entry, pricing power, economic efficiency and innovative behavior. There are market structures that opposite each other, which are perfect competition and monopoly.
ReplyDeletePerfect competition market or perfectly competitive market has large numbers of buyers and sellers, none of which can influence the price unless factors of consumers, having homogenous product. Perfect competition market has high competition, which benefits the consumers.
Perfect competition benefit consumers when it comes to pricing. Due to the extreme competition in the market, firms would have to compete to give out the most affordable price but still using great efficiency of resources and raw materials to create the best product out there. When one firm in a perfect competition market decreases its price, other rival firms would do the same thing. Thus, prices of goods fall, which benefits customers.
Consumers get variety of products to choose from, which varies in the quality, price and features. This allow customers to compare and choose the best one that satisfies their needs and budget.
In perfect competition, consumers have perfect information about the producers’ products’ prices, features, quality and availability of a certain good. When one firm decides to increase the price higher the market price, consumers can make assumptions and rethink their choices. This allows buyers to make more briefed choices and would make the best decision when purchasing a product.
Despite all that benefits for consumers, perfect competition has some drawbacks. A perfect competition might bore consumers, as there are homogenous or same products in the market. This prevents different product choices to occur, which may be a problem as different or unique product choices are important in a market.
Also, the use of research and development is insufficient. The presence of homogenous products may allow less profit earned by firms, to be used for research and development.
There is weak innovative behavior in a perfect competition market. Innovation may occur only when new ideas or methods are used. Innovation of products may not take place as rival firms only compete between same products. Therefore, customers cannot purchase a unique or economically efficient product.
B: Good Work, You explained nicely the question.
DeleteDiscuss question must be concluded.
A perfect competition is where there is a large number of firms selling homogenous products with similar prices, as well as large number of consumers. It is where firms and consumes have free entry and exit to the market, which means that there is no government intervention (barrier) for firms and consumers to enter and or leave the market. Firms also have free advertising cost. The cost and benefits of the actions of firms will not affect third party. All firms have relatively small market share because there are many firms selling the same product, so it may be hard to have a big market share. A perfect competition helps to avoid monopoly.
ReplyDeleteGenerally, consumers do want to be supplied by firms in perfect competition, because consumers have more information and know best about the product being sold and the market price of the product. Consumer will also have surpluses and economic welfare.
Perfect competition is when there is a competitive situation between firms in the market. Competition between firms may encourage firms to increase in production, and may also encourage efficiency. With this, firms will definitely produce good and productive products, which may increase consumers’ satisfaction. Consumers are also benefited, as they are receiving qualified products. Firms in perfect competition are also responsive to consumers’ changes demand.
All firms in perfect competition are price takers. Firms are price takers, which means that if the firm is selling the product above the market price, consumers will not buy the product. However if a firm is selling the product below the market price, consumers wont buy the product because the quality of the product may not be as good as the product sold with market prices. The firms will sell the product at the lowest price, but still earning some profits to consumers, as there is a competitive situation in the market.
However, everything has its good and bad. Perfect competition may not always satisfy consumers. Firms have minimal profits. It is harder for them to make investments, as they may not have sufficient amount of money. Firms will then only have few types of products sold, which may affect the consumers, as they would not have a wide variety of products to choose from.
As the competition between firms in perfect competition is very competitive, firms will be more focus to produce more products so that they could compete with other firms. Firms will then ignore the product design and its specification. A good design will definitely attract consumers. Consumers will no longer be attracted to the product, if the product design is not maximized.
Monopoly market or imperfect market is where one dominant producer leads the market and set higher prices for its products. Being an exact opposite, monopoly does not have any competition as there is only one leading firm that outcast other firms.
ReplyDeleteMonopoly can benefit from the use of economy of scale. Economy of scale can be achieved when there is an increased in production of goods while reducing the cost per unit of a product (average cost reduces). But this is the benefit for the leading firm not the consumers.
In a monopoly market, goods are sold at a high price. When this happen, more profit can be made to invest on research and development. Advanced research and development (R & D) can lead to better product for consumers.
As the large industry has no competition, it has its ways to maintain its ability by being more efficient and lower costs than in a competitive market. This can be done when the firm is innovative, providing new ideas and methods used. It will benefit customers by having to be sold at a reduced and affordable price.
However, a monopoly can restrict the choices made. As there is only one leading company with great product, consumers don't get to choose a variety of product that will satisfy their needs and budget.
A monopoly market restricts the consumers’ sovereignty. Compared to perfect competition, prices change according to consumers’ demand. In monopoly, the consumers are unable to have authority of the price or market price.
Compared to a perfect competition market, a monopoly market charges a higher price than in a competitive market. This restricts consumers that want to purchase goods but are on a budget.
To wrap things up, consumers would be better to be supplied by firms in perfect competition as there are greater advantages compared to firms in a monopoly market. Although firms in perfect competition lacks in R&D, innovation and homogenous products, consumers get to experience the variety range of products with different price range and so forth. On the other hand, consumers get to enjoy the advanced tech products sold in monopoly but needs to pay a lot of money.
Reference:
http://tutor2u.net/economics/content/topics/competition/competition.htm
http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
http://tutor2u.net/economics/revision-notes/a2-micro-market-structures-summary.html
http://www.economicsonline.co.uk/Business_economics/Monopoly.html
Originality (based on grammarly.com) : 95%
Monique 8C
Whereas monopoly is a situation where a single firm owns the whole market for a particular product with many consumers. In a monopoly market, firm does not face competition, as t is a single seller producing a unique product. A monopoly firm has a right to restrict other firm to enter the market. Resources ownership, government license, copyright are some factors that restrict the entry of other producers to the market. Monopoly firms also have some information that other firms may not know.
ReplyDeleteIn monopoly market, firm will enjoy excess or abnormal profits, because they are a single seller and they could monopoly the prices for their product. The profits earned by monopoly can be used for improvement in technologies, research and development, and other stuffs. The improvement of technologies, research and development will help to maintain the firm’s status as a monopoly company. Monopoly avoids duplication of products and also saves resources.
Monopoly firms also enjoy economies of scale, as it is the only producer of a unique product in the market. Economies of scale are the situation when the firm increased in production of goods and services, and they will have lower average cost. The benefits of economies of scale can then be passed down to consumers so that consumers will also enjoy the benefit. Monopoly can restrict the entrance of another firm entering the market. There will be barriers such as government intervention
Consumers will also receive disadvantages received from monopoly firms. The biggest disadvantage of a monopoly firm that consumers received is that they may be charged with a high price for a bad quality. Consumers may buy the bad quality product because they have lack of information about the product, as the firm is the only producer producing a unique product.
Monopoly is a single firm producing a unique product, so the firm will not face any competition. If the firm is lack of competition they may have lack of experiences. Lack of experience may lead to low quality of product. If the firm is not used to competition, when another firm appear in the market and produce a similar product, the firm may not be ready for competition and may fall.
Firms in perfect competition and monopoly has their own advantages and disadvantages to consumers. However, consumers prefer to be supplied by firms in perfect competition, as their prices are lower compare to monopoly firms. The advantages of monopoly are more for the company rather than for consumers. As the conclusion, consumers do want to be supplied by firms in perfect competition rather than monopoly firms.
100% unique content
References:
Economic textbook & notebook
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?
http://www.s-cool.co.uk/a-level/economics/market-structure-1/revise-it/the-costs-and-benefits-of-monopoly
B: Good work charlotte
DeleteI appreciate your hard work in completing this task. We need to remember Discuss question must have conclusion.
Monopoly is only happen when your are the only producer or supplier in that area. This could happen by regulation .Usually, it apply to state own enterprise. This type of company usually didn’t do much advertising , since they are the only company that supply the goods.
ReplyDeleteI am using PLN as a case study. They are the only electricity provider in Indonesia. Their advertisement usually is about how to save electricity instead of asking customer to subscribe their services. They know that customer will have to subscribe their service since they are the only provider.
And like most utilities company in the worl , PLN is heavily subsidized by government. Basically, they charges their customer lower than their cost. In this situation, as a customer I would rather supplied by a monopoly company since I am enjoying subsidized prices.
Moreover, PLN is adopting a single price policy meaning they charges the same Rp/KWH in java and Papua while the cost of providing electricity is different in Java and in Papua. It will be more costly to provide electricity in Papua than in Java since Papua has no infrastructure and no economic of scale.
If PLN practice in the perfect competition, our friends in Papua won't be able to pay their electricity bill since PLN will charge them double or triple than our Java's prices. In this case, a consumer in Papua would prefer the monopoly.
Gasoline, is also another example where Pertamina is the only player in subsidized gasolinecategory.The consumer would like monopoly situation since the government subsidized Pertamina’ s premium and diesel. While in perfect competition, consumer is going to pay the market price which is double than the current price. And the same as with PLN, Pertamina is also adopting one price policy for premium and diesel across Indonesia, so that people in Papua will pay the same price with people in Jakarta
And the same with PLN, Pertamina’s advertisement is also about how to save the gasoline usage and encourage people to use the non subsidized one.
However, if i am buying phone, i would like to be in perfect competition. For example, blackberry was dominating the smart phone for years, they become lazy and didn't develop the touch screen technology until apple introduce i phone. With the new touch screen technology, apple ruled the smart phone world and kicked blackberry from the throne. However, Apple’s Iphone is expensive, not many people could afford it. In addition, I phone’s OS system also is not accommodating to all apps developers. Then android work together with Samsung and other brand to came out with an affordable smart phone. As a result, Apple ‘s market share start to decline and they are forced to launch I phone 5c which is less expensive than the normal I phone. Recently, in order to compete in lower price segment, Blackberry launched Blackberry Jakarta which is using OS 10 but at much cheaper price than z10 or Q10
With more players in the phone industry, the marketing spending is also increasing to entice consumer to buy their product, I see a lot more phone ads on the billboards in Jakarta than 2 yrs ago. Most the ads are promoting the phone’s features.
In conclusion, I think in general consumer like a good and cheaper goods. So it is depend on which situation that can deliver that good cheaper good. If monopoly with the help of subsidy can give customer cheaper good than the perfect competition, consumer will prefer monopoly. However, usually perfect competition will create cheaper goods and will encourage innovation. So usually customer prefer perfect competition situation
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references:
http://en.wikipedia.org/wiki/Monopoly
http://en.wikipedia.org/wiki/Perusahaan_Listrik_Negara
http://www.livemint.com/Consumer/pPo1fvZYeK6quPXaAU1OJN/Blackberry-to-launch-sub200-smartphone.html
http://en.wikipedia.org/wiki/IPhone
http://www.thejakartapost.com/news/2014/02/03/indonesia-s-fuel-subsidy-monster-the-root-problems.html-0
http://www.thestreet.com/story/11313266/1/apple-beats-blackberry-in-business-phones.html
B: Good work Nicholas,
Deleteuse many examples to explain the question. Conclusion must be one side.
Perfect Competition, What is it ??. well,based on Wikipedia.org Perfect competition or sometimes called Pure competition means that there is no one in the market of the product that have power to control or set the price of the product in the market because the conditions are strict. And then what is Monopoly?? monopoly is the situation where a specific company or person is the only supplier of the product in the market for example: Jasamarga who monopolizes the toll roads in Indonesia,(even though there is some small firm that also own toll roads) for it being the supplier of toll roads own by the government this means that all or most of the toll users pay to Jasamarga that is owned by the government its just the same as PAM and PLN who dominates the market for clean water and electricity for it is the only supplier for the specific homogenous product and is owned by the government.
ReplyDeleteCustomers actually would benefit more in perfect competition than monopoly because in perfect competition this means that there is more than one product ore there are variations of the same product in the market unlike monopoly where there is only one supplier for the product and this means that it gives a limit for the customer because the customer can only buy one brand because there is only one supplier.
another advantage is customer can determine the price of the product ( based on Wiki.answers.com) and this means that the customer can bargain the price of the product and get the price that is suitable for them
and here is an advantage of the Perfect competition for the firm, if there is competition this encourage the firms to work or to find more efficient way to produce the goods
The disadvantage for the world is that more firms means that it produce more externalitties such as pollution than a single company producing the goods in monopoly
And so as the end to our discussion the answer is yes consume will want to be supplied by perfect competition than being supplied by a single company
Refrence:
-http://en.wikipedia.org/wiki/Perfect_competition
-http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?#slide=4
Originality:100% based on smallseotools.com
c, Lacks detail explanation.
DeleteMarket structures shows the amount of firms producing identical, homogenous products. They are known to characterize a market, such as the number of relative buyers and sellers, level and forms of market competition, the extent of product differentiation, and ease of entry to and exit from the market. Two basic well known structures are perfect competition and monopolistic competition. Perfect competition and monopolies are the exact opposites, they each have different structure, features, the pros as well as the cons, and because of that they will have different demand, market sizes, and so on.
ReplyDeleteIn a perfect competition, large numbers of different firms will compete in supplying an identical product and the same number of customers wanting to buy it. No one will have any power to influence the market price, as they are all price takers. The price, however, is determined by the forces of demand and supply in the industry as a whole. Individual firms have to accept the prices set by their industry. They are required to adjust its output to the ruling market prices so that their average revenue is more or equal to the marginal revenue.
As opposite, a monopoly is when one or a handful of dominant firms have sufficient market power to restrict supply and competition and increase market price. Because of the restrictions, they are faced with little or no competition. They set their own prices, which is why they are noted as price makers. This means they will charge their prices much higher than as expected, and by that, monopolies will earn abnormal profits over and above what it could earn.
Consumers then, would not be benefited by the monopolies, but would be benefited by perfect competition. Thisis r to the extent on why consumers generally prefer perfect markets over monopolies. With monopolies, the consumers faced with little alternatives simply may have to continue buying the product of the monopoly or go without.
Consumers not only depend on prices for their demand on a product, but also to non pricing factors. The range of product and after-purchase benefits to the consumer is also important. Consumers are also seeking satisfaction, care and value. In a perfect competition, producty features and brand images will be highly differentiated, also of the product designs available, the quality of after-sales services and product prices that tends to change frequently. By these, the firms are hoping to attract consumer demand more than any other products.
Because monopolies restrict competition from their rivals and products, they offer less choice presentable in a competitive market.
Monopolies can be faced with little or no incentives, and they might have none to increase their quality of good or services. A monopoly may cut further costs to increase their profit margins, and so they may reduce product quality. This may be unfavourable to customers as they would pay a ridiculous amount of money for a lower quality.
As monopolies have little or no competition and earns abnormal profits, it will tend to make less effor than a competitive firm to ensure it’s resources are used in the most efficient way, without letting down costs. This means it is ineffictive in managing and also the production costs may be higher than in a competitive firm.
A perfectly competitive market, on the other hand, is perfectly efficient. The total economic surplus, which is the sum of producer and consumer surpluses, is fully maximized. Consumers, therefore, might want to go with a more effective one’s such as them.
ReplyDeleteAnother problem for monopolistic competition is that of fosters advertising and the creation of brand names. Advertising increases customers demand into spending more on products because of the name associated with them rather than because of rational factors. In a monopoly market, the consumer is faced with a single brand, making information gathering relatively inexpensive. In a perfectly competitive industry, the consumer is faced with many brands, but as the brands are identical ininformation gathering , hereby, are also relatively inexpensive. In a monopolistically competitive market, the consumer should collect, and process information on a large number of different brands so they are able to select the best of them. At most cases, the cost of gathering information needed to selecting the best brand exceeds the benefit of consuming the best brand instead of a randomly selected brand. As a result, consumer is confused and may infrere from them . Some brands gain prestige value and can extract an additional price for that.
However, some firms in a perfect competitive market can be tempted to mislead their consumers, as example, making misleading or exagerrated claims about their products in order to increase their sales amd boost profits at the expense of their competitors.
A perfect competition, may also determine their own prices, as not all perfect competition are fully ‘perfect’. They are also not fully efficient on productivity, and their range of product may fall with lack of ideas.
A monopoly, on some cases, may still charge low competitive prices and offer high quality products because it may fear that new firms would be attracted by much higher prices to enter the market it dominates and will compete for its sales. A monopoly may also still face competition from firms overseas or from other firms selling products that still satisfies similar wants.
So as conclusion, perfect competition and monopolistic ones are differently favoured by consumers. Consumers preferrably will choose perfect market compared to monopolistic as they are more fulfilling on demands (price, quality, after-purchase services and benefits). However, monopolistic can still gain favour in the market by charging low prices if they want to so they could increase it’s sales, and so on.
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References:
https://www.boundless.com/economics/monopolistic-competition/monopolistic-competition/monopolistic-competition-compared-to-perfect-competition/ http://www.whatiseconomics.org/microeconomics/perfect-competition
Economics textbook
Monopoly is only happen when your are the only producer or supplier in that area. This could happen by regulation .Usually, it apply to state own enterprise. This type of company usually didn’t do much advertising , since they are the only company that supply the goods.
ReplyDeleteI am using PLN as a case study. They are the only electricity provider in Indonesia. Their advertisement usually is about how to save electricity instead of asking customer to subscribe their services. They know that customer will have to subscribe their service since they are the only provider.
In economic theory, perfect competition (sometimes called pure competition) describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Still, buyers and sellers in some auction-type markets, say for commodities or some financial assets, may approximate the concept.
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).
So in my conclusion When monopoly happen the company will be more relax because there is no competitor but consumers will buy it and in the perfect competition there is many producers so they are competing each other buy price / advanced technology because there is many homogenous product in perfect competition so they try to be the best for example : Samsung and Apple , Apple launch 5s with fingerprint and samsung also launch s5 with fingerprint but cheaper price so consumers will be Favor in perfect competition