Grade 8B 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
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ReplyDeleteIn economy, there are several types of market such as monopoly, oligopoly and also perfect market competition. Monopoly is a situation in a market of one region or country where the goods or services is only supplied by one person or firm. This means that consumers actually have no choice but to buy the goods and services from that one company only. Whereas, perfect market competition is where goods and services are provided by many firms and no firm is large enough to have the market power to set the price of homogeneous products. Hence, the competition of the market is pure from the quality and the pricing of the products as the consumers have the free will to choose and buy the products that they want based on their own will. There are advantages and disadvantages of monopoly and perfect competitions.
ReplyDeleteAdvantage of monopoly:
• This avoid duplication of goods
• The monopoly enjoy economies of scale since they were the only supplier
• Monopoly can be used for research and development
• Price discrimination which might be used by the monopoly can be benefit to weaker section of the society
• This can afford to invest the latest machinery and technologies
• The government get revenue from the tax
Disadvantage of monopoly:
• The level of service is very poor
• Consumer might get asked to give a higher price
• There is no competition so low quality goods might be produced
Advantages of perfect competitions:
• The resources will be allocated in the most efficient way
• Increase competition
• The price usually is cheaper
• There will be allocative efficient
• Usually the goods is high quality
Disadvantages of perfect competitions:
• There will be no scope for economies of scale
• Very low profit
• There will be less choice of goods for customer
• Sometimes it can caused market failure
The example of monopoly in indonesia is perusahaan listrik negara (PLN). The lower profit family will prefer to be supplied by PLN even tough they are a monopoly company because they will get subsidied by the government but for the medium to high profit family they will prefer to buy goods from the other company than PLN because they provide a low quality of goods but high price. But there are only one company that provide electricity for indonesia and those medium to high profit family do not have a choice to buy the goods from the other company because PLN is the only company that provide electriciy for indonesia.
The example of perfect competition in indonesia is the competition between shell and pertamina. At he first time pertamina is the only company that provide fuel for indonesia. During that time pertamina always give a very bad services for the customer because they cannot buy fuel from another company but since shell is made the people that have higher income move to shell because shell gives a better service and a higher quality. Since shell is made pertamina change and become better the customer now get a better service. But nowdays many people are on pertamina and only the higher profit people buy the fuel from shell because their fuel are more expensive and pertamina is subsidised by the government.
references:
- http://www.economicsguide.net/mv/tutorials/the-private-firm-as-producer-and-employer/advantages-and-disadvantages-of-monopoly/
- http://www.economicshelp.org/microessays/markets/efficiency-pc/
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vincent cia 8B
Market structure refers to the characteristics of a market, it is usually on the supply side, like the number of firms competing for the market. Market structure is simply the characteristic of the market that affects the behavior and interaction of buyers and sellers. There are things needed to be considered in a market structure, like the number and size of sellers and buyers, type of the product, condition of entry & exit, and the transparency of information. From what we’ve learn, there are 2 types of market structure : 1) Perfect Competition 2) Imperfect competitin (Monopoly). Monopoly market itself is divided into many, such as monopolistic market, oligopoly market, duopoly and monoposonic market.
ReplyDeletePerfect Competition is a type of market structure in which all the firms sell an homogeneous product. The firms are price takers, since they have no right to control the market price of their product. The market price will be set in the point of the price where the supply and demand curve meets. All the firms have a small market share, since there are many of them. There are free entry to and exit from the industry, it means that this type of business doen’t need many capital. We can start the business at any time, and end the business in any moment. People said that consumers will benefit more in a perfect competition. That is true that consumers / customers will benefit from a perfect competition, because they might have the complete information of the prices charged by each firm and the product’s cost of sales, so customers have many choices of products as substitutes if the goods or services that they are willing to buy is too expensive or not in a good quality.
While perfect competition, or usually known as a monopoly competition is a type of market structure in which there is a single dominant firm in a market. There is only one supplier of this market but many buyers, or there are no close substitutes for this firm’s product. This means that the firms is the price maker. Since there is only one firm participating in this competition, then the firm will be the one controlling over the market price because it is the one who can control the quantity supplied. And in this type of competition, the entry or exit of this business is blocked. People can’t just start and end a business like in a perfect competition. People in a monopoly competition will have difficulties in running a business if there is already one particular business ruling that section of the business. They can’t defeat that particular business in the number of sales. Once it enters the business, it spend lots of money on the advertisements and cost of sales. It needs lots of capital for opening this business. And once you close the business without even making a single profit, then you will definately receive losses. As we can simplify, a monopoly competition in a market is a competition where only one business or firm rules. And that particular business is the price maker, which means it controls the price of the goods or services. Of course that particular business will maximise their profits and customers will have to pay more. Customers have no choice but to buy the product because that firm is the only firm trusted by people to produce that particular product.
Many firms will of course expect to buy more products in a perfect market competition. Certain reasons like they can buy more products with cheaper prices rather than buying a product with a very high price. In a perfect competition, because there are many firms, they need to compete with each other, it makes them more motivated to research and developement. While in a monopoly competition, there are no motivation on those. And in a monopoly competition, there often happen discrimination of consumers. This are factors that makes people prefer being supplied by firms in a perfect competition rather than by a monopoly competition. But monopoly competitions will of course not only have disadvantages, they also have their own way of giving advantages to customers. Like for example, they provide the basic goods and services, public sector sets lower prices like PLN, and consumers will receive new innovative productions. Customers will also benefit. So, as we can see, there are also good part of a monopoly competition. It means that not every people would always want to be supplied by firms in a perfect competition, some could also prefer to be supplied by a monopoly. So, my point is every consumers have their own way of thinking. Some thinks that it’s betting to buy more innovative products with high prices rather than many products with cheap prices. But others like the opposite way.
ReplyDeleteReferences : - http://www.investopedia.com/terms/p/perfectcompetition.asp - http://www.investopedia.com/terms/m/monopolisticmarket.asp - textbook – notebook
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Regina Tanugrah 8B
Perfect competition is a market that will have a large number of different firms competing to supply an identical product and an equally large number of consumers wanting to buy it . in here both consumer and producer are price taker , which means none of them can control the price . perfect competition will have the homogenous product. Monopoly market is a market where there will be only one supplier of a good or service wanted by consumers. Well actually , consumers would always want to be supplied by firms in perfect competition , because in here the consumer can get a lot of advantages but will have fewer disadvantages. But sometimes , consumer can also want to be supplied by firms in monopoly because some of the monopoly market are being subsidized . So this will result in lower prices .
ReplyDeleteSo , consumers would always want to be supplied by firms in perfect competition . This statement is so true because in fact , it will bring a lot of advantages to the consumer but will result only a few disadvantages. Some of the advantages that will be earned by consumers are first , consumer can have more choices . Since perfect competition have a lot of supplier , then it means there will be also more choices for the consumer . Consumer can choose the product that they like most . The example will be like Tanah Abang . In here , there are a lot of supplier and there are a lot of choices for the consumer . Consumer can choose the product that they like most . so in ere consumer can be benefited . Second , there will higher quality of product . Because there are a lot of supplier , then it means there will be bigger competition . In here the firms are competing to have the most consumers in order to gain profit . So , they can attract the consumer by giving them high quality of product . Third , there will be a cheaper product . well , there will be a cheaper product because this can be used to attract the consumer and also , in perfect competition all of them are price taker . So , the price just be set by its own and usually it will be cheaper than those in monopoly . Fourth , They allocate resources in the most efficient way- both productively (P=MC) and allocatively efficient (P> MC) in the long run. So in here consumers can be very benefited and that’s why consumer want to be supplied by firms in perfect competition rather than in monopoly . Now what are the monopoly disadvantages? The first one is that monopoly market will have less consumer choices . This is because monopoly market will only have one supplier , then consumer cant have a lot of choice. Second , there will be lower product quality . Because monopoly market will only have one supplier , then all of the consumer must use that . They dobnt have any choices . the example will be like PLN in Indonesia . PLN is the company that provides electricity for all the people in Indonesia . there are no oher producers that provide this . So that’s why , PLN can do what they want because at the end consumers must use them because there are no choice . We can see that , PLN is not giving the high quality of services to the consumer . there are a lot of blackout happening in Indonesia . Third , there will be lower output and higher prices . This is because the supplier are the only one in the market .the example will be like iPhone 5s . iPhone 5s is the only phone that have that kind of technology . No other firms that can produce that kind of phone . This situation happen about a few months before . No other company that can produce a phone that have such technology .In this case , apple company are setting the price of iPhone 5s so high , because they are the only one . They also only have a fewer output . If we go to the apple store in Singapore ,there are no more iPhone 5s stock especially the gold one . This is because te apple company are only selling few of them . So , we can see , why consumers will always want to be supplied by firms in perfect competition rather than monopoly .
But , sometimes , consumer will also want to be supply by firms in monopoly rather than perfect competition . This is because perfect competition can also have some advantages and monopoly will also have some advantages . The advantages of monopoly market are first , there will be a lower prices . This is because they are being subsidized by the government . So in here , consumers can get a cheaper price .The example will be like Transjakarta bus in Indonesia . Actually ,the price to travel with t his bus is quite expensive . But its being subsidized by the government and make the price cheaper , so that even poor people can use the facility. Second , there will be more new high technology product . Some monopoly can produce a product that have high technology and make them be the only producers in the market . Consumers that are searching for this high technology can be benefited , because now they got what they want . The example will be like iPhone 5s . about few months ago , this Iphone 5s is the only one that have this kind of technology . So they are monopoly and for consumers that are searching for this technology can be benefited . Third , there will be new innovative productive and fourth , there will be basic goods and services. So that will be the reason why some consumers want to be supplied by firms working in monopoly . Well consumers want to choose the monopoly because perfect competition can have some disadvantages which are first , No Scope for economies of scale because of the high number of firms in there. Second , there will be lack of supernormal profits may mean the investment of Research and Development(R&D) is unlikely. Important for industries like pharmaceuticals.
ReplyDeleteSo , in conclusion , Almost All consumers will want to be supplied by firms working in perfect competition . this is because perfect competition will only have a fewer disadvantages but a lot of advantages that the consumers can have . But in monopoly market , consumers will gain a lot of disadvantages but fewer advantages .
References :
- notebook
- textbook
- http://www.enotes.com/homework-help/give-real-life-examples-monopoly-perfect-111737
- http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
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kezia-8b
Perfect competition is when all firms are producing identical products and there are a lot of buyers. A firm will pursue different pricing strategy depending on the type and amount of competition that they face from new and existing competitors, product feature and brand image will be highly differentiate and the range of product design is available, the quality of after sales service and product price will tend to change frequently as firms develop new ones they hope will attract consumer demand away from other products, the market share and profit of competing business will vary over time as new businesses enter the market and inefficient firms are forced to close, there will be price competition and non price competition between firms supplying similar goods and services. An example of non price competition is when firms will give gifts or prizes to the consumers if they keep on buying their products. However some firms in competitive market maybe tempted to mislead customer, an example is by making misleading or exaggerated claims about their product in order to increase their sales and boost their profit at the expense of their competitor. Monopoly is when there is only one producer producing the goods and there are many buyers, an example is LPG from pertamina. Firms in a monopoly can change the price frequently if it is profitable and if they are selling something that is rare they will increase the price of the product in fact, many public utilities around the world supplying gas and electric power remain pure monopolies. In a pure monopoly the single firm controls the total supply of the whole industry and may use this power to behave opportunistically. This means the monopoly can restrict market supply to force up the market price and earn excess profit or abnormal profit over and above what it could earn if it had to compete to supply the market with other firms. Because of this situation monopoly is called price maker and perfect competition is called price taker.
ReplyDeleteThe disadvantages of monopoly are less consumer choice, lower output and higher price; a monopoly can restrict market supply to set a higher market price then would otherwise occur in competitive market. Total output and employment in economy will be lower and another disadvantage is lower product quality, x inefficiency, and need of regulation. Fast or with little or no competition monopoly has no grid incentive to increase the quality of the goods and service it supplies. X inefficiency is caused by organisational slack due to a lack of competition. Many governments would have introduced law and regulation to control monopoly that acts against the public interest. Government must employ scarce resourced paid from tax revenue to monitor and regulate monopoly behavior. There are very few monopolies but many firms still have significant market power and may behave opportunistically. Firms in a monopoly would try to block new companies from joining the monopoly with 2 ways. The first way is they will make regulations harder for new firms who are joining the market, the second way is they will make it harder to buy materials for the monopoly products.
Consumers would want to buy goods and services from perfect competition because they will have more choices to choose from and there are also many substitutes available. Substitute goods are goods that will replace another product that has the same product an example is cooking oil. If for eample a consumer is used to buying tropical cooking oil and one day there is no more he/she can buy other cooking oil like bimoli this is the use of perfect competition. Sometimes in perfect competition they also do trade promotions and consumer promotions. Trade promotion is promotions aimed at wholesalers and retailers in the form of special prize discount, subsidized or free display racks, or stands, or gifts, or other incentives. Consumer promotion is actions that firms do to try and convince individuals to purchase a good or service. A normal business will just offer promotions like reduced prices, free samples o bonus offer for a short period of time in order to stimulate demand for their products. In imperfect competition there will be no problem of scarcity because each firm has their own output policy.
ReplyDeleteBut sometimes consumers like monopoly market for products that are important for life because price increases drastically so the government can make regulations to stop the price from increasing so much so that the people can afford it. An example is the price of PLN, LPG, and the tol fees all of this is organized by the government so that the people can afford it. Sometimes consumers like monopolies if the government subsidises a particular product that is produced by the firm in the monopoly, an example is the subsidy of gasoline so the price will never increase suddenly or will never increase drastically so that people can afford the prices. But in market monopolies there will be no promotions and sometimes it is harder to buy products from this type of monopoly because monopoly firms have tyheir own rules and the price can be more expensive.
For example a few years ago pos Indonesia is the monopoly firm for mailing. We know that pos Indonesia is famous for its cheap price but sometimes the letter that we want to send never reaches its destination. A few years ago people need to pick this post office because they have no choice. Today there are several firms for mailing like GNA and TNT. Their prices are expensive but the mail will always reach its destination. Wealthier customers will use GNC and TNT while lower class people will use pos indonesia.
So in conclusion consumers will like to buy goods from firms in perfect competition rather than firms in monopolies. Firms in perfect competion will have a lot of advertisements and promotions that will support the growth of other industries like advertising industry and telecommunication industry(TV commercials and radio commercials). Monopoly is also liked by the people there are subsidies and the government will guarantee that the products will never run out.
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Economics book
Consumers would always want to be supplied by firms in perfect competition rather than a monopoly, well a you know 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. It means that perfect market has the same prize , the product is also homogenous and the perfect market competition have a large number of production. While monopoly is the situation which they have no competition such as PLN, means they own all of the electricity product.
ReplyDeleteConsumer would always want be supplied by perfect competition rather than monopoly market, it is correct because perfect competition have the same prize for all of them, so the consumers no need to find the other shop or company that give them the cheaper prize , if the prize is all the same means the consumer just need to find the good and the best quality of product in the other company or in different company or shop . Second , in order to get profit the company or the shop only can get their profit by producing the best quality of product , why ? because since all the prizes are the same so the consumers will only need to find the product that have the good and best quality , so the company will compete to produce the best quality of product , so that it will result that the quality of goods of the product will increase because there is a competition at producing the product. Third , they would also create or produce variety of product in order for consumers to choose which product they want to buy that is balance for the want and the prices of the product. The variety of product will also influence the profit , just take example there are company A and company B , company A don’t produce a variety of product , while company B produce variety and different kinds of products. Consumers can choose more options in company B rather than company A and therefore consumers will buy the product on the company B rather than company A . fourth, They allocate resources in the most efficient way- both productively (P=MC) and allocatively efficient (P> MC) in the long run. It means that it is the type of efficiency that the company create for the consumers , the product that they produce is the one that is desirable for the consumers and the people. Well if they fail to allocate the market resources in the effective way they will get market failure . well as you know market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient , one of the reason of the failure of the market is the wrong knowledge of the people.
Now is the disadvantages of perfect competition for consumer and all of the people , first, no scope for economics of scale because there are high number of firms there. Economics of scope may be similar to economics of scale. Economics of scale means there is a reduced in the average cost because buying a lot of product. While economics of scope means make product diversification efficient if they are based on the common and recurrent use of proprietary know-how or on an indivisible physical asset. Example as the number of promote increased so that many people can be reached per unit of money spent. Second, undifferentiated product because all of the product are homogenous so that in different kind of company or shop they will sell the same of product, just take an example, in a market there are company A and company B they both are selling the same kind of product for example a car. Third, lack of supernormal profits which mean the research and development are unlikely, since they are homogenous so that they only can get the profits if they have good quality so that they will have little profits and may can be lack of research and development which can be very useful for the company.
Monopoly is when they own all of the product so it means that they have no competition, monopoly have several advantages like first , they will have economics of scale and will affect the average cost to fall, why monopoly will create economics of scale ? because people will just only buy the product from their company because there is no other company so people will just buy a lot to use it in the future and so that the average cost will fall. Second, high profits since the company will set the price high and so that the consumer will must still need to buy in order for their living , so they will have high incapital too and so they can use it for research and development that cost high. But sometimes government would also give them subsidies in order for the low level of consumer to buy the product. Third, since they have high profits and so they can research and development means they can create some new product and innovative product.
ReplyDeleteNow the disadvantages of monopoly , first , monopoly have a high prices so that some of the low level people can’t buy the product and therefore so that the government will gave some subsidies. If the monopolies have a high prices means they can control the market. Second, the monopoly have no motivation to research and development because they will think like this, if all of the consumers already buy their product and they also already get high profits, for what they research and development and create innovative product therefore they will be lazy. Third, less consumer choice since they are lazy to research and development to create innovative product, so the consumers will have less choice or option for the products.
So in the conclusion, consumers will always want to be supplied from the perfect competition because they have the same price and the cheap price and they also have variety of products too and the quality are also good, rather than the monopoly market that have the higher price or the expensive prizes, less option or choice of the product since they are lazy for research and development and the quality of the product is bad.
references:
https://www.google.com/#q=what+is+meant+by+market+failure
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
https://www.google.com/#q=what+is+meant+by+perfect+competition
http://en.wikipedia.org/wiki/Economies_of_scope
notebook
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A monopoly is a market structure in which the market is controlled by 1 company only. There are two types of monopolies first is pure monopoly in which there is only 1 company that is producing the product thus they have total power in the market, the second one is normal monopoly in which a company has more than 40 Percent control of the market. Normal monopoly happens more often as usually there will be other companies taking some part of the control but pure monopolies do happen sometimes. A perfect competition is a market structure in which there are multiple producing companies that has control in the market. In a perfect competition there are more competitors to a company, which gives them motivation to be competitive in selling their products.
ReplyDeleteAt most scenarios consumers will want to be supplied by companies in a perfect competition.
Because in a perfect competition there are more companies producing, therefor increases motivation for companies to be competitive if they want more sales. This will greatly benefit the consumer as competitive products means that either the products that they are provided are going to be cheaper or they are going to be much higher in quality or even both. This is the opposite for a monopoly, as there is no motivation to be competitive the controlling company can just abuse their power as the monopolizing company and still get large amount of sales because they have large control over the market. The other reason would be that in a perfect competition there are multiple companies meaning a plentiful amount of variation in products instead of 1 in a pure monopoly or 1 dominating in a normal monopoly.
But there are reasons why consumers would want to be supplied by companies in a monopoly instead of companies in a perfect competition.
One would be that because in a monopoly the main company’s sales is so high, they would increase their production to the point in which it can fulfill the demand of the consumers. This would benefit the consumer as certain problems like stock shortages are mitigated. This doesn’t happen in a perfect competition, as in a perfect competition the company’s sales doesn’t give enough reason to actually increase the production level. Another reason is that the firms are going to give more innovative products, as they want to stay as the most powerful company in the market they will need to produce innovative products. This won’t happen in a perfect competition as every firm hasn’t reach the point in where they should stay as the most powerful company in the market. Instead they are all approximately equal to each other hence perfect competition.
But the benefits in a perfect competition to a consumer is much more substantial than that in a monopoly type of market structure.
So to conclude what I have discussed, no consumers will not always want to be supplied by a company in a perfect competition, but because there is more benefit in a perfect competition most of the time consumer want to be supplied by companies in a perfect competition
References includes:
http://en.wikipedia.org/wiki/Perfect_competition
http://www.investopedia.com/terms/p/perfectcompetition.asp
Notebook
I have checked with http://smallseotools.com/plagiarism-checker/ the results show my content 100% unique
A market structure refers to the characteristics of a market. This includes how many firms compete in the market , how competitive the firms are in the market, the differentiation of the products of firms and how easily a new firm can enter the market. There are mainly 2 types of market structure which are perfect and imperfect competition. In an imperfect competition market there are only several or only one suppliers. Due to this , suppliers will be able to increase their price as high as they want it to be to make profits. In a perfectly competitive market , there is a huge amount of firms that supply identical product with the other firms and has an equally large number of consumers who demand the product. Therefore , in a perfectly competitive market neither the supplier nor the consumer would be able to influence the market price of the product. Perfect competition market does not involve any competition at all since the product is identical. Though there is no actual perfectly competitive market in the real world. Perfectly competitive market may bring advantages and disadvantages to consumers. These are :
ReplyDelete1.Higher consumer choice.
There is a large number of supplier in a perfectly competitive market. Therefore, this can allow consumers to choose products between firms. Although there are a lot of suppliers producing identical products, consumer might prefer another supplier than the other suppliers because of factors that can influence the customer choice such as : 1. The owner is a friend of the consumer 2. It is closer to the customers location 3. A firm has some factors that other firms doesn’t have, etc. Rather than in a monopoly competition , there are several or only one supplier available. Then there is a low consumer choice and they are force to buy the product of the firm because there are no other suppliers that supplies the kind of product the consumer wants.
2. Lower prices
Since suppliers produce an identical product as the other suppliers , their AC will be the same as other suppliers. So the price of each product in every supplier will be the same. Therefore both of the consumers and suppliers will not be able to influence the market price of the product. Unlike in a monopoly competition, the supplier are able to increase the price how expensive they want it to be because there are no other suppliers that supply the same kind of product as its. Due to a perfectly competitive market, consumers will be able to get lower prices than in a monopoly competition.
3.Price will not change
As it is said before , price will be lower than in a monopoly market. And it will remain the same. This is because it will be pointless to increase or decrease the price of a product in a perfectly competitive market. If a supplier try to increase the price , consumers will prefer other rival suppliers that has the same price and the same quality. Similarly, if a firm try to decrease the price , they will lose money unless they have find a way to decrease its AC. But it wouldn’t last long because other suppliers will notice this and try to find way to decrease their AC and reduce the price. Unlike in a monopoly competition, the price of a product can increase as high as the supplier want to.
But there are also disadvantages for having such advantages. These are :
ReplyDelete1.Difficulty of consumer to choose
Since there are a lot of supplier with identical product , consumers might get it difficult to choose which product from which supplier they want because there are a lot of supplier and each of the suppliers produce identical product as the other suppliers in the market. Consumer might be confused because all of the product have the same price and quality.Unlike in a monopoly market, there are several or only one supplier. Therefore consumers don’t take it difficult to choose from several suppliers only, they don’t even need to choose when there is only one supplier.
2. Lower quality of goods
Although the market price of goods in a perfectly competitive market is lower than a monopoly market sometimes the quality is as well lower. If the price of the product is low than the quality of goods might also be low because in order to produce high quality goods you need high quality materials and high quality material are expensive. The price of high quality goods is then expensive and it will be impossible to produce high quality goods without high quality materials. Then it would be impossible for a supplier to sell high quality goods with such low prices. Unlike in a monopoly, suppliers give high quality goods with very high prices.
3. No innovation
Since price of the product cannot increase , than supplier will not try to be more innovative or improve the product because the price of the good must be the same or the market structure will fail. To improve or make a new product needs research and development. These research and development is expensive and need a lot of time to do. If the price cannot be increase, then they need to sell their product at the same price . And if supplier will sell improved goods at the same price with non improved goods, then they will make a loss. Unlike in a monopoly , suppliers will do anything to increase their price and make higher profits.
So , in conclusion , a perfect competition market are able to give consumers benefits that can’t be found in an imperfect competition. A perfect competition gives the consumer more choices of product, so that they can choose which ever product that suits them the best and gives them the suitable price consumer needs so that they can be afforded easily and all of this is for the welfare of consumers. But the benefits might bring some drawbacks to consumer.
Reference :
1.Economics book
2.http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?#slide=3
3. http://en.wikipedia.org/wiki/Perfect_competition
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ReplyDeleteThe difference between perfect competition and monopoly is that a perfect competition, has a huge number of consumers and buyers, in other words, they are homogeneous, they are price takers, which means they are not in control of the price they sold, unlike monopoly, it only has one producer, but a huge number amount of buyers, they are in control of the market, setting prices, and production of the industry. But we do know that both of this is a market structure. An example of a competition market is a dairy industry. Which consist of Danone, Fonterra, Nestle, The Laughing Cow, Lurpak, and many more. These firms are competing against each other to gain more profit and fame. An example of a monopoly market is the Microsoft company, it qualifies all the requirements to be monopoly, which are one seller, high barriers to entry, and information and mobility.
Customers may have reasons why they would like to be supplied by a perfect competition, rather than by a monopoly. Customers will have wide range of choices to choose from, because a perfect competition has large producers in an industry. The products that the perfect competition produce may be similar to each other, but every consumer will have their own opinions on which one is better, an example is when a producer in firm A has only 5 colors of a product, but there are 10 colors to choose from in firm B, customers will likely to choose from firm B because there are more desirable colors that the company provides for the customers. Another example is when one company may provide extras, or bonus features to their product, example, the mobile phone mito may provide free screen guards to anyone who purchases their mobile phones. They also allocate resources in the most efficient way; they both are productively (P=MC) and allocatively efficient (P> MC) in the long run. This means that a perfect competition uses efficiency on what the customers want, they only produce goods that are high in demand which means efficiency is achieved. Other than that, the prices in a perfect market competition are relatively low, there are many firms selling the same type of product, and each of them are trying their best to provide the cheapest goods and still with good enough quality for the customers. Another real example is the cross mobile phone with Samsung mobile phone. Cross is relatively cheaper because they just entered the market and their quality is average, but Samsung has better quality and that Samsung is already well-known around the world, so it depends on what people’s need is, whether they prefer cheap phones with average quality, or higher price with better quality. Because of this, prices rarely increased or decreased, it usually will stay the same, why? Because when a firm tries to increase its price, most of its customers will move to another firm because they sell much more cheaper goods rather than the first firm. An example of this case is the indomie company with the mie sedap, they both are instant noodle producers, at first, indomie and mie sedap are at the same level, but now, because indomie tends to increase their price year by year, mie sedap now is favouritable to the people, even though indomie still haven’t experience market failure, but the rate of mie sedap is better than indomie.
But there are also several drawbacks to the customers when they choose competition market better; first, No Scope is available for economies of scale because of the high number of firms that are present in the industry. An economics of scale is a large scale of production reduces cost per unit by purchasing large quantities of product. Second, they are all undifferentiated products, because they are all homogeneous. This may make customers to be confuse which brand/firm should they rely on, because there is just too much option for them, because of this usually people will get frustrated and they will end up not buying them at all instead.
ReplyDeleteThey also do not contribute into research and development, this is usually because the firm may lack of supernormal profits to fund the research. This could be very important for industries such as the pharmaceutical.
Whilst in a monopoly, they tend to charge higher prices, because they control the market, so they basically can set up any prices they want. There are also no motivations for research and development because they are the only ones providing the goods in a industry, which means it doesn’t really matter because whether they do it or not, they will not lose their customers. There is also less consumer choice, unlike the perfect market. less consumer sovereignty (rights), artificial barrier to entry, and also discrimination to consumer, this is referred to as racism, differentiating between race, sex, ethnicity, and many more.
To end my essay, in conclusion, people do prefer perfect competition rather than monopoly to be supplied with. There are benefits and factors that a perfect market has that the monopoly don’t, such as varieties of quality and prices to choose from, unlike the monopoly, there are only one firm that produces the goods and are relatively expensive.
References:
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
notebook
http://www.enotes.com/homework-help/give-real-life-examples-monopoly-perfect-111737
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Ok first i will explain the meaning of monopoly market and perfect market competition perfect market competition meaning is a condition where customer or consumers are very numerous and producers are also numerous so producers fight for the consumers by lowering price and others and so in this market price is determined by the market not consumer neither producer example is seller in tanah abang they cant decide the price market did second is the meaning of monopoly , mono means one so it means one firm control all so the one that determined the price is the firm and customer will still buy even if they are expensive fine example is apple iPhone even if its expensive people are still fighting to buy it the question is monopoly in the world are very strong in their market strategies.these companies spent significant amount of money on the promotion and protection of the market.consumer benefits by getting more cost effective efficient innovative product as compare .
ReplyDeleteDoes consumer or customer always wanted to be supply by firms in perfect market competition rather than firm in monopoly.
Ok lets discuss
First is that a firm in monopoly have innovative product thats what make the, the only thing in the market that is beneficial to the customer because that firm is the only one who produce or make that product with awesome innovative works and so this will also increase the prestige of the customer for owning such expensive high tech product like for example is iPhone they have the best one and only technology of 64 bit and finger scanning in their smartphones people will fight to get this cool high technology in this case price doesn't matter because they produce high quality product that will satisfied the customer and give them higher prestiges so many people of course will choose monopoly first for this reason so customer wont be cheated for high price and think they are disadvantaged by the firms because they get a high tech device and a high prestige from that device
Second is that some monopoly that are subsidized by the government have lower prices fine example of such firm in Indonesia are such as PLN which are our country firm that produces electricity PLN are subsidies by the government thats why our monthly price for electricity is cheaper than what is should have be other example of the firm in Indonesia that is subsidized such as PAM also we cheaper price for water in our houses because government also subsidized PAM thats why many customers or consumers also rather choose monopoly rather than perfect market competition
Third is because firms in monopoly can produce certain product that firm in perfect market can't such as for example apple they produce high quality product which is iPhone and other firms in perfect market competition cannot produce such as other firms such as samsung,polytron,evercoss,acer,nexus,nokia,oppo and many more other firm cannot produce a smartphone with 64 bit and finger scanning yet that's why consumers of iPhone company is not disadvantaged by iPhone but they actually get advantaged because they get a smartphone which is the only one in the market which is capable to do something other smartphone from other company such as samsung,polytron,evercoss,oppo,acer,nexus and nokia can do thats why many consumer still choose firms in monopoly rather than firms in perfect market competition to supply their products
Fourth is the firm in monopoly have rules and regulation from firms like antitrust laws,cca,monopolies restrictive trade practice that prevent monopolizing firms to get or to get to much profit from their consumer giving benefits to the consumer because they don't really need to pay very high price for a good quality innovative product so many people will rather get supplied by a monopoly firm because in perfect market there is no such firm that will check the profit the producers are making
DeleteAnd fifth the last is that firms in monopoly market have better services in them because they are fighting to get consumers in the market and they spent a lot in this thats why they make customer services , insurance to the devices if it get destroyed and many mire so customer will be more sastisfied and feel better with the good skills services from customer services and also thy could get insurance for their items fine example is apple company, they provide twenty four seven customer service for consumers or customer if they wanna complain or give other ideas to the apple company products and they also give insurance for their gadgets such as mac book, iPad ,iPhone and iPod
So consumers can get their gadget back if its broken accidentally or many more stuffs while producer in perfect market wont make a twenty four seven customer services and this producers pr reseller can also people who do fraud and if their product is broken there is no insurance but you must buy a new one
So in my conclusion is that sometime for consumer its better to be supplied with the firms in monopoly rather than the firm in perfect market competition because firms in monopoly have certain advantages than firms in perfect market competition doesn't posses such as innovative product that doesn't disadvantaged the customer if they purchase that firm in monopoly product because its the most innovative product that time like iPhone 5s now and that its also cheaper sometimes for the firm in monopoly which are subsidized by the government such as PLN , PAM and pertamina oil and many more and third is that they can make certain product that perfect market competition cannot make and fourth is that the consumers don't need to pay so high for the cool innovative good product because some other certain firms such as autitrust laws,cca and monopolies restricted trade practice make sure that they don't take to much profit and fifth is they also get customer service which is twenty four seven and insurance to their product which firms in perfect market don't provide so thats some reason which make people or consumer choose firms in monopoly rather than firms in perfect market competition
References:
Cornell notebook
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PART I
ReplyDeleteIn perfect competition market, all firms contained in the market mostly always uses various pricing and output policy in order to attract more buyers or customers so that they can expand their business size, increase brand image quality, increase their profit and to be the market leader. So, because mostly the firms in perfect market competition always set the lowest price in the market, so they will be the price taker and the customers will be the price maker. Why the firms should set the lower or lowest price for their product than other firms in the market, is because to make customers to buy their product but if the firm charge higher prices on their products, no any or only less number of customers will buy their product, because all products in the perfect competition market are mostly same or similar, no any more unique features, same model same quality, so that customers will buy on the cheapest product. Different with monopoly market, mono means one, so one only one in market which means there is only one firm or producer are in charge in the market. If there is only one producer in the market, of course there will be no competition among other firms which make that firm in the monopoly market being the price maker and the customers will be price taker. Why? Because customers will have no any other alternatives from other producers. Because customers will be the price taker, then the firm will charge the product price as much as they want, as expensive as possible to make them earning more and more profits.
So the statement for “consumers would always want to be supplied by firms in perfect competition rather than by a monopoly” will be correct. Why is that so? Because consumers will get much benefits if buying products that is available in perfect competition market. First, consumers could choose on product they desired to buy which has the cheapest price because all other products with that kind will be the same or just having similar properties, such as notebooks. Second, the various choices of the kind of the products desired which could be selected by consumers. Third, beside able to buy the product with low prices, the consumers may also get promos and discounts on a big sale day. The product quality produced by the firms competing in the perfect competition market will be more qualified and guaranteed (minimum the product quality meets the market product standard) because all firms in the perfect competition market will protect their brand image, they won’t let consumers mistrust them which may cause decrease in sales or even no anymore sales which leads them to go bankrupt. Beside those before benefits, customers will have chance to buy the product that has the most updated, interesting, cool, useful features, and any other product factors which leads to the innovative leading products. Why is that so? Because every firms in the perfect competition market will always find something new, do a lot of research and development in order to attract customers beside from pricing and producing output strategies, is to make their products to have more amazing features that is not available in other products that produced by their competitors. But look at the monopoly market side, it is totally different. Because the customers are the price taker and the firm is the price maker, of course that the price charged on the product will be very expensive. And the customers will still buy the product because they have no other alternatives while they need the product, such as electricity services provider.
PART II
ReplyDeleteSo the example of monopoly market could be PLN, as the only electricity service provider in Indonesia which has lack of organizing the power so that electricity shortages frequently occur. The example of perfect market competition is DVD disc. Customers in the Chinatown in Jakarta, Indonesia (as an example) will always find the cheapest DVD disc for burning data by looking for the most benefit promo given by the seller. Another with the same case with school notebooks market, customers will find the cheapest notebook to buy because all products only has the different brand but the quality and design is the same and has no any more features, just for writing or drawing. They will find promo like buy 10 get 3 or something like that which will make the price per product unit will be cheaper. Also with another example of perfect competition market, is because formerly bag market which the bags are made from cotton, some firms make it more attractive that successfully attract more customers, is to make a folding bag which after being folded, the big bag will be looked like a wallet.
But sometimes consumer would prefer to be supplied by monopoly market’s firm than by perfect competition market. Why? Because first, all basic goods such as electricity, water, line telephone could be produced because all those in-monopoly market firm are under control by the government, while if the firms that are being controlled by private sector don’t want to produce basic goods. And the firms that are being controlled by the government are having possibilities for the products to be subsidized so that consumers won’t have to pay for the real cost which is much more expensive. While in some perfect competition markets are having standard prices which is still a bit expensive and the firms in the market are all don’t want to take risk for using pricing or any marketing strategies so that all firms are following the standard price which is a bit expensive. Why a bit expensive? Because producers desire to maximized their profits not to make their production stages to be more efficient, but taking more profits by increasing the price of the product, which the products could be included to be a basic goods or frequent-used goods.
The example of those perfect competition market is furniture market. For example even though the wood of the cupboard is not too natural or the quality that is not very good and not too strong, the price of the cupboard will be expensive and the price are a standard price in the market.
So in the final conclusion, not always monopoly market’s firm is impacting something not beneficial to the customers and not always perfect competition market is always beneficial to customers.
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Since in some countries, a firm is doing monopoly which receive complaints to the government due to total domination some people would prefer products supplied by perfect competition market firms, but does they always wanted to do so? So today, I’m going to discuss whether consumers would always want to be supplied by firms in perfect competition rather than by a monopoly.
ReplyDeleteSince monopoly means one firm domination in the industry, monopoly firms, like PAM Lyonnais, PLN, and other firms, have the control of the industry, their actions will totally effect the industry and when new contender firms came in, they can do actions to eliminate those firms and since there is only one firm, there will be less variety of products, but the firm will increase the products to high prices, and most people won’t be able to afford it. But if it is on the perfect market system, it would be more beneficial in most times since if it is perfect market, there will be a lot of types, to keep profits stable. Firms will make the price lower and people could afford the product. And due to many, stable competitors, there will be various types of products in the industry, for example, the medium class cellphone industry, the mop and sweep industry, car industry, etc. And also, even though the products are cheap, doesn’t mean that it’s bad quality, like I said before, to stabilize the profits, they have to create good quality products to gain people trusting. And since the product quality is good, the firm need to get good materials, but in high prices, it’s not really available, so the firm will use the resources in a most efficient way to save costs of the firm. But, there are still some disadvantages of this system, profits are going to be very little since costs are high and profits are on average. And since that profits are less, this system won’t achieve EOS since costs are high and profits are in the same level.
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DeleteI have already stated several times in previous chapters that a fundamental purpose of any economic system is to achieve the highest possible state of human happiness or welfare. Within a market economy, perfect competition and monopoly must ultimately be judged on the extent to which they contribute to improving human wellbeing, while remembering of course, that perfect competition is an abstract and unreal market structure.
ReplyDeleteIn order to judge the contribution of a market structure to human welfare, we must first assess the extent to which the market structure is efficient or inefficient. In terms of private self interest, any decision made by an individual, a firm or by a government is economically efficient if it achieves the economic agent’s desired objective at minimum cost to the agent itself, and with minimum undesired side effects. However, in terms of the whole community, the social costs incurred and the social benefits received need also to be considered. Before discussing the extent to which perfect competition and monopoly can be considered efficient or inefficient, below are some of the meanings economists attach to the word efficiency. Technical efficiency A production process is technically efficient if it maximises the output produced from the available inputs or factors of production. Alternatively, we may say, that at any level of output, production is technically efficient if it minimises the inputs of capital and labour needed to produce that level of output. To achieve productive efficiency, a firm must use the techniques and factors of production which are available, at lowest possible cost per unit of output. In the short run, the lowest point on the relevant short-run average total cost curve locates the most productively efficient level of output for the particular scale of operation. However, true productive efficiency is a long-run rather than a short-run concept. A firm’s long-run average cost curve shows the lowest unit cost of producing different levels of output at all the different possible scales of production. Output Q1 is also productively efficient, but only for the short-run cost curve SRATC1. All the forms of efficiency so far considered are examples of static efficiency, i.e. efficiency measured at a particular point in time. By contrast, dynamic efficiency measures improvements in technical and productive efficiency that occur over time. Improvements in dynamic efficiency result from the introduction of better methods of producing existing products, including firms’ ability to benefit to a greater extent from economies of scale and also from developing and marketing completely new products. In both cases, invention, innovation and research and development (R&D) improve dynamic efficiency. (Invention refers to advancements in pure science, whereas innovation is the application of scientific developments to production. Arguably, perfect competition has the advantage of promoting consumer sover- eignty, in the sense that the goods and services produced are those that consumers have voted for when spending the pounds in their pockets. When consumer sovereignty exists, the ‘consumer is king’.
(However, the extent to which consumer choice exists in a perfectly competitive world would be extremely limited. All the firms in a particular market would sell identical goods at an identical price, namely the ruling market price.) Firms and industries that produce goods other than those for which consumers are prepared to pay, do not survive in perfect competition. By contrast, a monopoly may enjoy producer sovereignty. The goods and services available for consumers to buy are determined by the monopolist rather than by consumer preferences expressed in the market place. Even if producer sovereignty is not exercised on a ‘take-it-or-leave-it basis’ by a monopoly, the monopolist may still possess sufficient market power to manipulate consumer wants through such marketing devices as persuasive advertising. In these situations, the ‘producer is king’. Economists generally regard perfect competition as more desirable than monopoly. However, the desirable properties of perfect competition (namely economic effi- ciency, welfare maximisation and consumer sovereignty) do not result from any assumption that businessmen or entrepreneurs in competitive industries are more highly motivated or public-spirited than monopolists. Economic theory assumes that everyone is motivated by self-interest and by self-interest alone. This applies just as much to firms in competitive markets as it does to monopolies. Entrepreneurs in competitive industries would very much like to become monop- olists, both to gain an easier life and also to make bigger profits. Indeed, from a firm’s point of view, successful competition means eliminating competition and becoming a monopoly. But in perfect markets, market forces (Adam Smith referred to the invisible hand of the market) and the absence of barriers to entry and exit, prevent this happening. Imagine for example, a situation in which a firm in a perfectly competitive industry makes a technical break through which reduces production costs. For a short time the firm can make supernormal profits. But because in perfect competition, perfect market information is available to all firms, other firms within the market and new entrants attracted to the market can also enjoy the lower production costs. A new long-run equilibrium will soon be brought about — at the lower level of costs resulting from the breakthrough — with all firms once again making normal profits only. Ultimately of course, consumers benefit from lower prices brought about by technical progress and the forces of competition, but it is market forces, and not some socially-benign motive or public spirit assumed on the part of entrepreneurs, that accounts for the optimality of perfect competition as a market structure. Although perfect competition is an abstract and unreal market structure, it is inter- esting to consider the forms competition might take in a perfectly competitive market economy. The first point to note is that price competition, in the form of price wars or price-cutting by individual firms, would not take place. In perfect competition, all firms are passive price-takers, able to sell all the output they produce at the ruling market price determined in the market as a whole. In this situation, firms cannot gain sales or market share by price cutting. Other forms of competition, involving the use of advertising, packaging, brand-imaging or the provision of after-sales service to differentiate a firm’s product from those of its competitors simply destroy the conditions of perfect competition.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteThese are the forms of competition which are prevalent, together with price competition, in the imperfectly competitive markets of the real economy in which we live. So the only form of competition, both available to firms and also compatible with maintaining the conditions of perfect competition, is cost-cutting competition. Cost-cutting competition is likely in perfect competition because each firm has an incentive to reduce costs in order to make supernormal profit. But even the existence of cost-cutting competition in a perfect market can be questioned. Why should firms finance research into cost-cutting technical progress when they know that other firms have instant access to all market information and that any super- normal profits resulting from successful cost-cutting can only be temporary? Think also of the nature of competition in a perfect market, from the perspective of a typical consumer. The choice is simultaneously very broad and very narrow. The consumer has the doubtful luxury of maximum choice in terms of the number of firms or suppliers from whom to purchase a product. Yet each firm is supplying an identical good or service at exactly the same price. In this sense, there is no choice at all in perfect competition.
ReplyDeleteSo, as the conclusion, every consumers prefer to some monopolies or some common company on the perfect competition, depend on what situation
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Richard Sanders – 8B
Economists have developed the concept of perfect competition in order to compare different market structures. As such, all producers and consumers will exchange at the equilibrium market price.That is why they are called the price takers. Price takers means firm is the one who decided the prices , not the consumers . So, the prices of every product will be the same to be sold to all consumers. A firm would be unable to produce much more cheaply than others. Even that if it did, it couldn’t do so for long, as other firms would soon find out how this was done and use the same methods to lower their own production costs. Subsequently, market prices would fall. A perfect competition market usually does not need any competition at all – since the products are same identity , all firms have the same average costs and have to accept the same market price. A perfect competition market is also called competitive market since they compete each other.
ReplyDeleteWhy do firms compete ? In some reasons, it is said that competition is good for the consumer. Competition encourages firms to use their resources efficiently to reduce their costs.They compete to ; 1. Increase their customer base , 2. Increase sales, 3. Expand Market Share, 4. Achieve product superiority, 5. To Increase Popularity, 6. To Maximise Profit.
A single dominant is called a monopoly. The opposite extreme in economics of perfectly competitive market is a pure monopoly. A firm is a pure monopoly if it is the only supplier of a good or service wanted by the consumers. Monopoly can restrict their market supply to force up the market price and earn excess profits or abnormal profits over and above what it could earn if it had to compete to supply the market with other firms.
The disadvantages of monopoly :
1. Less consumer choice.
2. Lower output and higher prices
3. Low product quality
4. X inefficiency
5. The need for regulation
Two main types of barrier to market entry:
1. Natural barriers to entry
2. Artificial barriers to entry
Natural barriers to entry
1. Economies of scale
2. Capital size
3. Historical reasons
4. Legal considerations
Artificial barriers to entry
1. Restriction on supplies
2. Predatory pricing
3. Exclusive dealing
4. Full line forcing
A perfect competition market is the price takers. It means that the firm will give a fix price , so the consumer will not set the prices for each products that are sold there in a perfect competition market. A monopoly is also a price maker.
So in conlusion, consumers will always want to be supplied with firms in perfect competition market because in some perfect competition products have a good features and quality rather than in monopoly.
-Leonardo 8B
Reference : - Economics Book
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Perfect competition or perfect market is a market structure, wherein there is only there is no individual firm large enough to have market power to set the price of a homogenous/identical products, in this instances, the firms are the price taker and the industry is the price maker. While monopoly is a part of the imperfect market structure, where there is one firm that rules over the market.
ReplyDeleteIn the perfect competition, from, as they all ways say, there would be pros and cons, for this market type, the pros would be more advantageous to consumers. The products supplied by the perfect competition would have lower prices than the ones in the monopoly, meaning that they won’t have to spend a lot compared. Perfect competition would be highly responsive to the consumer’s demand because they supply homogenous products, bringing satisfaction to the consumers because their demand/wants are fulfilled. The con to this would just be that there is a lack in product variation but could be compensated by the fast adaptation of firms towards the consumers’ demands.
While towards the monopoly side, they are more beneficial towards the firms rather than the consumers themselves, which itself has been discouraging one to but the product. Monopoly is when one firm dominates the market, meaning that it has the control over the prices of their products, which means that consumers could just be charged with high prices for lower quality products and to add on top of that, with only one firm ruling, there will be no competition, and that could be the cause of the lack of higher quality products. Monopolized firms would have bigger access to capital but with their assured place on top, there could be a possibility that they wouldn’t use it to research and develop their products for the consumers, or just barely improved once, giving dissatisfaction and also lower quality products and less consumer choices
So, in order to conclude on what have been said above and said from the consumer’s side. Consumers would tend to prefer products supplied by the perfect competition because of the low prices, though the less variety in the choices and they also respond well to the demands of the consumers while in the monopoly, yes, the have research and development, but there is a high possibility that they won’t do it, if they had secured their place at the top, giving dissatisfaction to the consumer, hence, most consumers wants the firms in the perfect competition to supply them.
References:
http://en.wikipedia.org/wiki/Perfect_competition
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
Notebook
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Grace - 8B
In the economy there are various types of competition, but basically they’re divided into 2. Perfect and imperfect market competition. Perfect market means that in that market there are plenty of producers who sell homogenous products. An example of this could be chocolate. There are various producers of chocolate for example Nutella, Hershey’s, Cadbury, Nestlé, etc. People would usually buy what’s on sale if in perfect competition since all the products are homogenous, or indifferent. In this type of market, advertising is useless. Because when you advertise and make your product more attractive it would mean higher costs, and when you increase your costs you also increase the price of your product. Your customers will then buy from a cheaper producer instead of buying your product, so you will increase in costs and yet fail to achieve higher profits. However, big advertisement campaigns will raise demands and will get you more consumers.
ReplyDeleteMonopoly is absent in perfect competition since no individual is large enough to affect the market. Now in perfect market, it is easy to enter and to exit. Why? Because firms that are in perfect market have no power to control the price. And they will earn zero economic profit in the long run. If one of the firms tries to increase the price of a certain type of good then the consumers are more likely to buy from a different producer. On the contrary, if the firm charges the product lower than the price set by the market, all of the consumers will be running in line to buy the product since it is cheaper than all the other. However, the firm will not be able to accommodate the entire industry demand, the costs would sky rocket. The firm will then be forced to increase their price back up to the price determined by the market to reduce some of their consumers. This shows that the firms aren’t able to determine the price of the products being sold but the market itself determines the price thus all the producers are price takers. When the market determines the price for all the firms that means they also determine the demand for the particular product.
A producer in a perfect market will not be able to control the price of the product but they can control the amount of outputs they want to produce. The firms can choose the level of output that may maximize their profit. The profit-maximizing role would be marginal revenue equals to marginal cost. Since in this market you can only control the amount of output you produce, you will always choose the level of output in which marginal revenue equals to marginal cost.
Basically in a perfect market there are no monopolies. The firms that compete each other sell homogenous products hence they give more options to consumers. They also will compete to gain more consumers by reducing the price and giving more advertisements and hence giving the consumers more advantages.
Imperfect market, on the contrary, has various competitions. Firstly there is the monopolistic competition, in which the firms sell a large number of products, and they have the characteristics of a monopoly. In which the dominating firms control the market, for example, Apple. They control the market since they are the one that is profiting most and they are the biggest company hence if their prices rise or fall it’ll affect other firms too. Then there is the oligopoly competition, which is the biggest competition. It is a cutthroat competition in which a small number of firms control the market. For example would be the oil market or the car market. Another type of competition is duopoly, in which the market only consists of 2 firms/producers; a good example of this would be Visa and MasterCard. Monopoly is when there is only one producer for a certain good or service. There are no competitions an example of this would be PLN, PAM, etc. Lastly, there is monopsony, where there are various producers but only 1 customer. An example of this would be the people who study on nuclear science (there are plenty) and yet the ones who employ them is only the government (one consumer).
ReplyDeleteMonopoly has only 1 seller, who sells a different product compared to all the other producers. There are also significant barriers to enter this type of competition; they are so high that no other producers may enter the industry. The barriers may include patents; it will prevent people from making the same type of product you’re producing until it expires. Sole ownership of the key resource would prevent competition, for example if you’re the only firm that has access to supply then you will be the only one who has the resources to make the products. Many high costs will also keep the other producers out. And if your fixed costs are extremely high enough there may be economies of scale, which will result in the advantage of the dominating firm since it is better to have only 1 producer in the market. For example, power plants are very expensive and you also need to install all the cables, hence it is better to only have one producer since then the cost per unit will be very low. But if you make 2 companies compete the cost per unit will end up being very high. Thus it is more efficient to have only 1 producer, this is what we call a natural monopoly.
According to my theory I think that consumers will benefit more from perfect market since they can get more options and less prices than in monopoly. In monopoly, there is only one producer and they have no choice but to buy from him. And also the competition in perfect market will make them more efficient and productive hence the new products will come out faster for the consumers. The firms may also produce the goods with better quality to increase consumers. So, my conclusion is that perfect competition is more beneficial to consumer than monopoly is.
Charlene 8B
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Reference:
- http://www.investopedia.com/terms/p/perfectcompetition.asp
- Notebook
- http://www.investopedia.com/terms/m/monopoly.asp
There are two types of market that is being discussed, first is monopoly market and second is perfect market. First, monopoly market is when theres only one firm in this particular industry, and usually the products or service they produced is necessary to all people, and if theyre a private company, they will set a very high price because they know theyre the only hope for people on that particular service or goods, and people will buy it, and because of that, government will take over this company to subsidy it and give the community low prices, example is PLN, government subsidied it so we only need to pay less money. While perfect market is when theres a lot of consumer and producer, where the consumer can kinda control the price, because since the producers sell the products which are almost the same, they compete for the consumers. And one of the way to attract their rival’s consumer is to reduce the price, and because the consumers have the perfect knowledge of the products (price, quality, etch) they’ll definetlly pick the cheap one. And there are many other ways to attract more consumer like by increasing the number of advertisement and increase their quality. The other example of monopoly was like Microsoft a couple of times ago, before Microsoft launch their internet explorer, theres another software for computers and laptops which people need to buy it, which we known it as Mozilla firefox, was a monopoly because it’s the only software available, then Microsoft came to invented the internet explorer and the Microsoft company wants to steal all firefox’s consumer by it set up the Microsoft in windows for free and then it blocked the mozila firefox from windows, and then Mozilla firefox gone bankrupt, this is the example of the competition in monopoly market, it was long time ago and now its not a monopoly anymore because there are many other software available in present . in the perfect market industry have small market share, because most of them has aim to get the bigger consumer. Every people can freely come in and out the market, and all firms are price takers. For the examples, this type of market, perfet market can barely or many not seen in the public, because it barely exist in real life. Take a random example of a bottled water, this industry of bottled water has many companies, but each of the companies has different ways to filter the water, to put some good bacteria inside it, and since each company has their own way to do it, but the output will most likely to be the same, and if some products will have zero differenciation , itll go to a small numbers of a very large firms, where there the companies want to cut throat of other companies in order to win the market, or also we know as oligopoly. So the example of perfect market is nearly never been found in real life.
ReplyDeleteBy logic, all consumers will want to be supplied by perfect market compared to monopoly market, because they will eventually receive more benefits when supplied by perfect market because in perfect market the producers aims for the consumers, and for that competition will happen, which will encourage the firms in the industry to increase their quality in order to attract consumer and they may reduce their price too, to attract the customers of the other firms. So they’ll get more consumer, and the other firm will have to follow what the first firm do in order for them so survive, and when the fisr firm reduce its price, its market condition will be elastic, means the demand for the goods or services will or can change which is to increase, and which will cause more total expenses, yet higher profits. Nearly the same with increasing its price, when the firm decrease the price of its products, they will eventually get inelastic market condition, and then they will increase their total expenses and will, mabe can give more profit to the company. There are two types of competition, price competition and non price competition. In non price competition, the firms compete for all the best qualitites of the product, the best services for consumers, best features and best advertisement. There are some benefit of advertisement, for both firm and consumer. The advantages of advertisement to firm is to create the customer’s wants, which will grow the feeling of wanting the products of service of the company and which will give benefits to firms because consumer will be attracted to buy their products, and for the brand image, which the consumers will repeatlly buying the same product over and over, and it protects the sales of the firms, itll protect the market, and the continuos of the product which the firms keep producing over and over again. While the benefits of advertisement for the consumers are to give them more information of the product, for them to be able to compare one product to another product, so they can choose the best one for them to buy, and give higher satisfaction to customers because they know the the complete information and they’ll feel smarter, and itll reduce the lvl of competition between consumers because all people can freely choose their own choices.
ReplyDeleteThere are 5 types of price strategy, the market structure of the company, the market condition, the taxes and subsidy given by the gorvwenment and business objectives and the production costs. The market condition is when the condition of the market is in recession or prosperity, the market structure is the type of the market, like perfect competition or monopoly. The taxes or subsidy given by the government is a grand in cash or kind to producers, to make them sell their products at low prices. The business objectives is what the business want to achive the most, example is market share, while production costs is when the price is lower, they will be charged lower and consumers will have to pay in lower price too
So it came to conclusion that the customer will more likely to choose t be supplied by perfect market compared to monopoly because itll give them more advantages, even though both of the markets has advantages and disadvantages, perfect market will give the consumers w=more benefits and thatll make the consumer happy and satisfied.
Plagiarism: 85%’
Source: sir bipin’s explanation and corner nb about competition
Since in some countries, a firm is doing monopoly which receive complaints to the government due to total domination some people would prefer products supplied by perfect competition market firms, but does they always wanted to do so? So today, I’m going to discuss whether consumers would always want to be supplied by firms in perfect competition rather than by a monopoly.
ReplyDeleteSince monopoly means one firm domination in the industry, monopoly firms, like PAM Lyonnais, PLN, and other firms, have the control of the industry, their actions will totally effect the industry and when new contender firms came in, they can do actions to eliminate those firms and since there is only one firm, there will be less variety of products, but the firm will increase the products to high prices, and most people won’t be able to afford it. But if it is on the perfect market system, it would be more beneficial in most times since if it is perfect market, there will be a lot of types, to keep profits stable. Firms will make the price lower and people could afford the product. And due to many, stable competitors, there will be various types of products in the industry, for example, the medium class cellphone industry, the mop and sweep industry, car industry, etc. And also, even though the products are cheap, doesn’t mean that it’s bad quality, like I said before, to stabilize the profits, they have to create good quality products to gain people trusting. And since the product quality is good, the firm need to get good materials, but in high prices, it’s not really available, so the firm will use the resources in a most efficient way to save costs of the firm. But, there are still some disadvantages of this system, profits are going to be very little since costs are high and profits are on average. And since that profits are less, this system won’t achieve EOS since costs are high and profits are in the same level and people should survive with the same types of products every time due to less innovation. And due to same products, there will be duplication of products.
But in some cases, some people would prefer monopoly market system rather than perfect competitions due to its ease. Since there is only 1 contender in the industry, some people would find it easier to buy since there is only 1 or 2 types of product. There with be quite amount of Research and Development with can Create innovative products. With this there will be no duplication of product too since buying the materials will be expensive and only monopoly firms with big capital could buy materials like that, like Apple with sapphire screen. Economies of scale can be easier to be achieved. Economies of scale which means profit maximization by decreasing average costs. It would be easier to be achieved since the supplier will decrease costs due to bulk orders and special promos. So again, monopoly firms will have enough money to buy high tech machinery for the R&D of the firm. So, since monopoly firm has big assets, the tax will be in huge amount of money, with this money, the government could use the money for their advantage of using it to create transportation, governmental houses, etc. But, the disadvantages are quite a lot since in some cases, the service could be really bad, the monopoly firms’ minds be like: You buy lah, quick quick! If you don’t want, don’t buy and you won’t be cool. So, sometimes service can be so bad. Less competition will create less quality of products, even though for high prices, but if it in perfect market, low prices, good quality products, this is what we called with x-inefficiency.
ReplyDeleteSo, by summary:
Advantages of monopoly:
• This avoid duplication of goods
• Availability of R&D
• This can afford to invest the latest machinery and technologies
• The government get revenue from the tax
Disadvantages of Monopoly:
• Very Poor Service
• There is no competition so low quality goods might be produced
• X-inefficiency
Advantages of Perfect Market:
• Most efficient resource usage
• High Quality Goods
• Low Prices
• Competition Increase
• well informed consumer about the firms and its products
Disadvantages of Perfect Market
• Product Duplication
• Same type of product
• Lacks access to innovation
• Less customer satisfaction.
SO, I think that most people would not always prefer perfect market