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Question
Explain any four features of perfect competition
Solution
According to Mrs. Joan Robinson, “Perfect competition prevails when the demand for output of each producer is perfectly elastic”. The price of a commodity in perfect competition is determined by the market forces of demand and supply. Both, buyers and sellers have perfect knowledge of market conditions.
A close example of a perfectly competitive market could be the local flower market at Dadar (Mumbai), petrol pumps across the country etc.
1. Large Number of Sellers And Buyers:
In a perfectly competitive market, there are large number of sellers and buyers. Each seller and each buyer form a negligible part of the entire market. Therefore, no single seller or buyer is in a position to influence the market price. Both, sellers and buyers are said to be “price takers” under perfect competition.
2. It Sells Homogenous Product: All the firms in perfectly competitive market sell the same (homogeneous) product. It means their products are exactly identical in terms of size, shape, design, taste, colour, weight etc. Thus, all products are perfect substitutes for each other.
3. Free Entry And Exit: In perfect competition, there are no barriers on entry and exit of the firms. Any firm can enter or exit the market at its own will. If there is a hope of profit, a new firm will enter the market and if there are chances of loss, an existing firm may leave the market
4. Every Factor of Production Is Perfectly Mobile: There is perfect mobility of factors of production under perfect competition. Labour and capital are mobile; not only geographically but also occupationally (i.e. they can be put to any use). So, each factor input is optimally utilized and producer does notface any problem in production.
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RELATED QUESTIONS
Choose the correct option:
Classification of markets on the basis of place
a) Local market, National market, International market
b) Very short period market, Local market, National market.
c) Short period market, National market, International market.
d) Local market, National market, Short period market.
Choose the correct option:
Under Perfect competition, sellers are
a) Price makers
b) Price takers
c) Price discriminators
d) None of these
Give economic term:
The point where demand and supply curve intersect.
Give economic term:
The cost incurred by the firm to promote sales.
Find the odd word out:
Market structure on the basis of competition: Monopoly, Oligopoly, Very Short Period market, Perfect competition.
Characteristics of long period market:
- All factors of production and costs are variable.
- Firms are able to adjust all costs.
- It is for a few years, generally up to five years.
- Supply of commodity cannot be increased.
Number of firms producing differentiated products which are closely related –
Find the odd word
Market on the basis of place -
The interaction of demand and supply to determine price of a commodity in perfect competition is ______.
Product differentiation is the main feature of ______.
Assertion (A): Monopolist is a price maker.
Reasoning (R): Monopolist can fix the price of his own product as he controls the whole market supply.
Assertion (A): Product differentiation is the main feature of monopolistic competition.
Reasoning (R): Under monopolistic competition, all the products are perfect substitutes to each other
Identify & explain the concept from the given illustration.
Anoop Ayurveda produces unique herbal hair oil which has no close substitutes.
Distinguish Between
Short period and Long period
Distinguish Between
Monopoly and Monopolistic competition
Explain any four features of monopolistic competition
State with reason whether you agree or disagree with the following statement:
Seller is the price maker under perfect competition.
State with reason whether you agree or disagree with the following statement:
There is product differentiation under monopolistic competition.
State with reason whether you agree or disagree with the following statement:
Selling cost is the only feature of monopolistic competition.
Study the following table, figure, passage and answer the question given below it.
| Price per unit in Rs. | Quantity demanded | Quantity supplied |
| 5 | 100 | 500 |
| 4 | ______ | 400 |
| 3 | 300 | ______ |
| 2 | ______ | 200 |
| 1 | 500 | ______ |
- Complete the table (2m)
- Derive the equilibrium price from the above table with the help of Suitable diagram. (2m)
- Mention the equilibrium point and equilibrium price in above diagram. (2m)
- Explain the concept of equilibrium price with the help of above diagram (2m)
PASSAGE
Amul is the first choice of so many ice cream lovers in India among the top ice cream brand category. Amul brand, owned by Gujarat Co-operative Milk Marketing Federation, was established in 1946 in Anand, Gujarat.
The second on the list of top ice cream brands in India is Vadilal.
Cornetto and Magnum are one of the top ice cream brands in India owned by Hindustan Unilever. Mother Dairy is a very strong name in the Indian ice cream industry. This company is very similar to Amul, in terms of the products, they manufacture and sell. Another big player in the ice cream industry is Havmor. Havmor Company has been able to stand strong as one of the big fighters in the battle of top ice cream brands in India for very long. Ice cream market also has local and less popular brands apart from the top brands.
Amul was (and still is) in the Guinness record for running the longest- ever advertising campaign. The advertising strategy of Amul through digital marketing made the most of it through platforms such as Facebook, Twitter, Instagram, and others.
- Identify the most important feature of the ice cream market (1 marks)
- Identify the type of cost incurred by firms on advertising campaigns and strategies. (1 marks)
- Express your personal opinion about the ice cream market based on the above information (2 marks)
Explain the concept of perfect competition and price determination under perfect competition
What are the features of a market?
The Spot market is classified on the basis of ______.
Which one of the market deals in the purchase and sale of shares and debentures?
What is meant by Spot Market?
What is meant by Spot Market?
What is meant by Commodity Market?
Explain the types of the market on the basis of time.
Give economic terms:
The period in which all factors of production are variable.
Assertion and reasoning question:
- Assertion (A): With a rising price, the supply of a commodity falls.
- Reasoning(R): Seller earns more profit at a higher price.
Find the odd word out:
Classification of markets on the basis of time:
Give an economic term:
Period in which supply is fixed and so the price is determined by demand only.
Homogeneous product is a feature of this market.
- Monopoly
- Monopolistic competition
- Perfect competition
- Oligopoly
Read the given passage and answer the questions:
|
In common language the term market means a specific place where buyers and sellers of a commodity meet and exchange their goods. But in Economics it is not necessarily a place but it is an arrangement through which buyers and sellers come in contact with each other directly or indirectly and exchange of goods takes place among them. Market can be classified on the basis of place, time and competition. Market on the basis of competition is perfect competition and imperfect competition. Perfect competition is an imaginary concept of market and in reality, we observe various types of imperfect competition like monopoly, duopoly, oligopoly and monopolistic competition. In practice monopolistic competition is used. In this market there are some features of perfect competition and monopoly acting together. The uniqueness of this market lies in the fact that a difference is made between cost of production and selling cost. Selling cost refers to the cost incurred by the firm to create more demand for its product and increase the volume of sale. It includes expenditure on advertisement, hoardings, window display etc. |
Questions:
- Explain the concept of Market from Economic sense.
- Write the classification of Market.
- Write your own opinion about selling cost.
