Perfect Competition
The perfect competition market structure is where different sellers sell similar products resulting in the prices being in equilibrium ! Any increase in price will result in a decrease in the quality demanded of that product and buyers of the good will buy more from the competition. Let's consider an example
Ex1. John always buys the Grace coconut milk because he thought that it had the best quality and its price was the same the Lasco brand. The price of the Grace coconut milk increased and John started buying the Lasco brand.
Deduction
Generally, most consumers think this way in any market economy where there is a perfect competition. Any shift in price will from one competitor will affect sales. Therefore, prices remains in constant equilibrium.Any increase in price will affect the equilibrium
Graphical Representation of an Industry In Perfect Competition
Oligopoly
This type of market structure is one that only has a few competitors in that sense only a few firms dominate it. In this type of setting, the market is said to be highly concentrated. The oligopoly uses various pricing strategies and that is one of the reason they remain successful , for example the Worthy Park Estate that is known for growing and exporting sugarcane, even though smaller farmers can grow sugarcane , the operational cost to manufacture the sugarcane and export it would be a barrier to entry. However, we will be looking at barriers further on.
Let us now take a look at Pricing Strategies
The Oligopolies operate under the following strategies:
- Cost-Plus Pricing
- Colluding
- Predatory pricing
- Limit-pricing strategy
N.B Research the following strategies to engage in self-learning.
Barriers to Entry
In the oligopoly the barriers to entry are similar to the monopoly because of the dominance in the market. The cost to enter the market is very high for new comers. The barriers can be
- Natural
- Artificial
Additional Reading
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