Perfectly Competitive Market Examples

Perfectly competitive market

A perfectly competitive market according to Liozu, 2013 is a general market where competition is at its highest level. Economists that are neoclassical suggest that perfect competition produces the best results for the society and the consumers. Perfect knowledge characterizes perfect competition: this is where knowledge is freely offered to all the participants, there are no time lags or failure of the information in its flow. This means that the entrepreneur's role is limited and the risks to are minimal. Given that these consumers and the producers both have a perfect knowledge it's then assumed that they make rational decisions that maximize their self-interest, the producers maximize profits while the consumers

These products hence cannot substitute each other. In the monopolistic competition, the firm ignores their prices impact on the other firm's product prices while taking the charged price by the rivals just like it's given. In a coercive government, a monopolistic competition falls under a government granted monopoly. In this case, the firm maintains spare capacity. Examples of monopolistic competition include clothing's, shoes, cereals and restaurants and all the service industries in the different

There is an assumption among the consumers that there is a non-price difference amongst the competitor's products. There are very few if any barriers to entry and exit and finally the producers control the price up to a specified degree. It's essential to note that in the long run, monopolistic competitive market characteristics are almost the same as of those of the perfectly competitive markets. Their two main differences include production of heterogeneous products by the monopolistic competition and the involving a lot of non-price competition based on the product differentiation. In the short run firms that make profit will break even in the long term because of demand increases and the average total cost increases. This then means that in the long run, a firm that's monopolistically competitive makes no economic profits. This shows that the firm has great influence over the market simply because of brand loyalty. The firm then can raise their prices without losing their clients. In this case, the individual firm downward slopes are caused by the demand curves which contrast the perfect competition which is then perfectly elastic demand