Compare Contrast Perfect Compettiton Essay

A trade is every place where the sellers of a particular heavy or service sight meet with the buyers of that goods and service where thither is a strength for a transaction to take place. The buyers must have something they foot offer in exchange for at that place to be a potential transaction. Market structure Market structure refers to the factors, such as coat of the market place place, technological, greet and demand conditions and the barriers to entry and dismission, that would affect the effectiveness of managerial decisions.We can also consider the market structure as describing the state of the market with respect to competition. Market structures Monopoly Perfect competition Imperfect competition monopolistic competition c Oligopoly Overview Perfect competition is a theoretical market structure. It is primarily used as a benchmark against which other market structures argoncompargond. The industrythat best reflects perfect competition in real(a) life is the agr icultural industry. For example , As on that point are millions of farmers who would pull in rice & there are millions of consumers who would consume rice.In this graphic symbol not a single buyer or seller could make for the footing of rice. Perfect competition is a free-enterprise(a) market. Economist uses the confines belligerent market to describe a market in which there are so m any(prenominal) buyers & so many sellers that from sever altogethery one has a negligible impact on the market toll. Characteristics of abruptly competitive market- 1. Large number of buyers & sellers In perfect competition, there must be large number of buyers and sellers. Each buyer buys a pure quantity of the total amount.Each seller is so large that no single buyer or seller can influence the price and affect the market. According to Scitovsky buyers and sellers are price takers in the purely competitive market. Each seller (or firm) sells its harvest-feasts at the price deter mined by the market. Similarly, each buyer buys the commodity at the price determined by the market. 2. like product Under perfect competition, the product offered for sale by tout ensemble sellers must be identical in every respect. The goods offered for sale are perfect substitutes of one another.Buyers have no special preference for the product of a particular seller. No seller can raise the price above the prevailing price or dispirit the price downstairs the prevailing price. 3. Free entry and slip by Under perfect competition, there will be no restriction on the entry and exit of both buyers and sellers. If the existing sellers start making deviate profits, new sellers should be able to enter the market freely. This will bring down the abnormal profits to the normal level. Similarly, when losses will occur existing sellers may leave the market.However, such free entry or free exit is possible only in the long run, but not in the short-run. 4. Perfect knowledge Perfect c ompetition implies perfect knowledge on the part of buyers and sellers regarding the market conditions. As results, no buyer will be prepared to pay a price higher than the prevailing price. Sellers will not charge a price higher or lower than the prevailing price. In this market, advertisement has no scope. 5. Perfect mobility of factors of production The punt perfection mobility of factors of production from one use to another use.This feature ensures that all sellers or firms get equal advantages so far as work of factors of production are concerned. This is essential to enable the firms and industry to achieve proportion 6. Absence of transport cost Under perfect competition transport, cost does not exist. Since commodities have, the like price it logically follows that there will be no transport cost. In the event of the presence of cost of transport, there will be no single price in the market. fare cost occurs when there is no perfect knowledge of the market conditions o n the part of buyers and sellers. .No attachment There is no attachment among the buyers and sellers under perfect competition. Since products of all sellers are identical and their prices are the same a buyer is free to buy the commodity from any seller he likes. He has no special inclination for the product of any seller as in case of monopolistic competition or oligopoly. Theoretically, perfect competition is irrelevant. In reality, it does not exist. So it is a romance Profit maximation for a competitive firm The goal of any competitive firm is to make profit.Three general rules for profit maximization under perfect competition are stated as follows -If the borderline revenue is greater because marginal cost the firm should growing the output -If marginal cost is greater then greater then marginal cost the firm should decrease output -At profit maximize level of output, marginal revenue & marginal cost are exactly same Example Profit maximization for a perfectly compet itive market.