Managerial Economics

Condition of Perfect rival What many economists c either Perfect Competition is an idealized structure of an industry in which expenditure contestation is dominant -- in fact the only form of contest possible. The terminology Perfect Competition is quite common only when not quite universal. The term Pure Competition is likewise sometimes used. I will use the term P-Competition, where the P can stand for perfect, pure, or price competition -- whichever you like. A P-Competitive structure is defined by four characteristics. For an industry to befuddle a P-competitive structure, it must have all four of these characteristics: 1. many a(prenominal) buyers and vendors 2. A homogenous product 3. Sufficient knowledge 4. Free entry These atomic number 18 all characteristics that favor price competition. Each of these characteristics will be explained in turn. Many buyers and sellers: The idea is that the sellers and buyers are teentsy relative to the size of the food market, so that no one of them can fix the price. If there are many broken sellers, it makes it much harder for any seller or any group of sellers to limit the price. Similarly, if there are many small buyers, there is little opportunity for buyers to rig the price in their own favor.

Each seller reasons as follows: If we try to charge a price above the market price, my customers will know that they can get a emend price from my competitors. My own share of the market is so small that all of my customers will be able to buy what they indirect request from the competition -- and I wont have any customers left wing! Thus, the seller treats the price as being given and inflexible by the forces of the market independently of her own output. How many sellers? How small? There is no absolute answer to that question; only there must be enough sellers and they must separately be small enough so that each regards the price as being determined by the market, so that none of the sellers sees any opportunity to push the price up by cutting back on his or... If you want to get a full essay, order it on our website: Orderessay

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