Perfect competition: signs and distribution. Demand for a competitive seller's product. Examples of perfect competition (USE social studies) An example of a market of perfect competition is the market

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11.1 Perfect competition

We have already defined that the market is a set of rules, using which buyers and sellers can interact with each other and carry out transactions (transactions). Over the history of the development of economic relations between people, markets are constantly undergoing transformation. For example, 20 years ago there was no such abundance of electronic markets that are available to consumers now. Consumers could not buy a book, home appliances, or shoes by simply opening the website of an online store and making a few clicks.

At the time when Adam Smith began to speculate about the nature of markets, they were arranged in something like this: most of the goods consumed in European economies were produced by many manufactories and artisans, using mainly manual labor. The firm was very limited in size and employed a maximum of a few dozen employees, and most often 3-4 employees. At the same time, there were a lot of such manufactures and artisans, and the producers are fairly homogeneous goods. The variety of brands and types of goods that we are accustomed to in the modern consumer society did not exist then.

These features led Smith to conclude that neither consumers nor producers have bargaining power, and prices are set freely through the interaction of thousands of buyers and sellers. Observing the features of markets in the late 18th century, Smith concluded that buyers and sellers were guided toward equilibrium by an invisible hand. The characteristics that were inherent in the markets at the time, Smith summarized in the term "Perfect competition" .

A perfectly competitive market is a market with many small buyers and sellers selling a similar product in an environment where buyers and sellers have the same information about the product and each other. We have already discussed the main conclusion of Smith's "invisible hand" hypothesis - a completely competitive market is able to ensure efficient allocation of resources (when a product is sold at prices that exactly reflect the marginal costs of a firm for its production).

Once upon a time, most markets really looked like perfect competition, but in the late 19th and early 20th centuries, when the world became industrial, and in a number of industrial sectors (coal mining, steel production, railway construction, banking), monopolies formed, it became clear that the model of perfect competition is no longer suitable for describing the real state of affairs.

Modern market structures are far from the characteristics of perfect competition; therefore, perfect competition is currently an ideal economic model (like an ideal gas in physics), which is unattainable in reality due to numerous friction forces.

The ideal model of perfect competition has the following characteristics:

Many small and independent buyers and sellers unable to influence market price
Free entry and exit of firms, that is, no barriers
A homogeneous product is sold on the market that does not have quality differences
Information about the product is open and equally accessible to all market participants

If these conditions are met, the market is able to allocate resources and benefits efficiently. Efficiency criterion competitive market favors equality of prices and marginal costs.

Why does resource allocation efficiency arise when prices are equal to marginal cost, and is lost when prices are not equal to marginal cost? What is market efficiency and how is it achieved?

To answer this question, it is enough to consider simple model... Consider potato production in an economy of 100 farmers whose marginal cost of potato production is an increasing function. The first kilogram of potatoes costs $ 1, the second kilogram of potatoes costs $ 2, and so on. None of the farmers have such differences in production function that would allow them to gain a competitive advantage over the rest. In other words, none of the farmers has market power. All potatoes sold by farmers can be sold at the same price determined in the market for balances of total demand and total supply. Consider two farmers: farmer Ivan produces 10 kilograms of potatoes per day at a marginal cost of $ 10, and farmer Mikhail produces 20 kilograms at a marginal cost of $ 20.

If the market price is $ 15 per kilogram, then Ivan has incentives to increase potato production, because each additional product and sold kilogram brings him an increase in profit as long as his marginal cost does not exceed 15. For similar reasons, Mikhail has incentives to reduction in production volumes.

Now imagine the following situation: Ivan, Mikhail, and other farmers initially produce 10 kilograms of potatoes, which they can sell at 15 rubles per kilogram. In this case, each of them has an incentive to produce more potatoes, and the current situation will be attractive for the arrival of new farmers. Although each of the farmers has no influence on the market price, their joint efforts will bring the market price down to the point where the opportunities for additional profit for everyone and for everyone are exhausted.

Thus, thanks to the competition of many players in conditions of complete information and a homogeneous product, the consumer receives the product at the lowest possible price - at a price that only breaks the manufacturer's marginal costs, but does not exceed them.

Now let's see how the equilibrium is established in the market of perfect competition in graphical models.

The equilibrium market price is established in the market as a result of the interaction of supply and demand. The firm takes the given market price as the target price. The firm knows that at this price it will be able to sell as many goods as it wants, so there is no point in reducing the price. If a firm raises the price of a product, then it will not be able to sell anything at all. Under these conditions, the demand for the products of one firm becomes absolutely elastic:

The firm takes the market price as given, i.e. P = const.

Under these conditions, the firm's revenue graph looks like a ray emerging from the origin:

In perfect competition, a firm's marginal revenue is equal to price.
MR = P

This is easy to prove:

MR = TR Q ′ = (P * Q) Q ′

Because the P = const, P can be taken out of the sign of the derivative. As a result, it turns out

MR = (P * Q) Q ′ = P * Q Q ′ = P * 1 = P

MR is the tangent of the slope of the straight line TR.

A firm in perfect competition, like any firm in any market structure, maximizes overall profits.

A necessary (but not a sufficient condition) for maximizing the firm's profit is the zero derivative of the profit.

р Q ′ = (TR-TC) Q ′ = TR Q ′ - TC Q ′ = MR - MC = 0

Or MR = MC

I.e MR = MC is another notation of the condition profit Q ′ = 0.

This condition is necessary, but not sufficient for finding the maximum profit point.

At the point where the derivative is zero, there may be a minimum profit along with a maximum.

A sufficient condition for maximizing the firm's profit is observing the neighborhood of the point where the derivative is equal to zero: to the left of this point, the derivative must be greater than zero, to the right of this point, the derivative must be less than zero... In this case, the derivative changes its sign from plus to minus, and we get the maximum, not the minimum, of profit. If in this way we have found several local maximums, then to find the global maximum profit, we should simply compare them with each other and choose the maximum profit value.

For perfect competition, the simplest profit maximization case looks like this:

We will graphically consider more complex cases of maximizing profits in the appendix in the chapter.

11.1.2 The supply curve of a perfectly competitive firm

We realized that a necessary (but not sufficient) condition for maximizing the firm's profit is the equality P = MC.

This means that when MC is an increasing function, then in order to maximize profits, the firm will choose points lying on the MC curve.

But there are situations where it is profitable for a firm to leave the industry instead of producing at the point of maximum profit. This happens when the firm, being at the point of maximum profit, cannot cover its variable costs. In this, the firm incurs losses that exceed the fixed costs.
The optimal strategy for the firm's behavior is to exit the market, because in this case it receives losses that are exactly equal to the fixed costs.

Thus, the firm will remain at the point of maximum profit, and not leave the market when its revenue exceeds variable costs, or, which is the same thing, when its price exceeds average variable costs. P> AVC

Let's take a look at the chart below:

Of the five designated points at which P = MC, the firm will remain on the market only at points 2,3,4. At points 0 and 1, the firm will choose to leave the industry.

If we consider all possible options for the location of the line P, we will see that the firm will choose points lying on the marginal cost curve that will be higher than AVC min.

So the supply curve competitive firm can be built as part of the MC above AVC min.

This rule only applies when the MC and AVC curves are parabolas.... Consider the case where MC and AVC are straight lines. In this case, the total cost function is a quadratic function: TC = aQ 2 + bQ + FC

Then

MC = TC Q ′ = (aQ 2 + bQ + FC) Q ′ = 2aQ + b

We get the following graph for MC and AVC:

As you can see from the graph, when Q> 0, the MC graph always lies above the AVC graph (since the MC line has a slope 2a, and straight line AVC tilt angle a.

11.1.3 Equilibrium of a perfectly competitive firm in the short run

Recall that in the short run, a firm has both variable and fixed factors. This means that the costs of the firm consist of a variable and a fixed part:

TC = VC (Q) + FC

The firm's profit is p = TR - TC = P * Q - AC * Q = Q (P - AC)

At the point Q * the firm reaches the maximum profit, because in it P = MC (necessary condition), and the profit changes from an increase to a decrease (a sufficient condition). On the graph, the firm's profit is depicted as a shaded rectangle. The base of the rectangle is Q *, the height of the rectangle is (P - AC)... The area of the rectangle is Q * (P - AC) = p

That is, in this version of the equilibrium, the firm receives economic profit and continues to work in the market. In this case P> AC at the point of optimal release Q *.

Consider an equilibrium option when the firm receives zero economic profit

In this case, the price at the optimum point is equal to the average cost.

The firm may even generate negative economic returns and still continue to operate in the industry. This occurs when, at the optimum, price is lower than average but higher than average variable costs. The firm, even receiving an economic profit, covers variable and part of the fixed costs. If the firm leaves, then it will bear all the fixed costs, so it continues to operate in the market.

Finally, a firm leaves the industry when, with the optimal volume of output, its revenue does not cover even variable costs, that is, when P< AVC

Thus, we saw that a competitive firm can make positive, zero, or negative profits in the short run. A firm leaves the industry only when, at the point of optimal release, its revenue does not cover even variable costs.

11.1.4 Equilibrium of the Competitive Firm in the Long Run

The difference between the long run and the short run is that all factors of production for the firm are variable, that is, there are no fixed costs. Also, as in the short term, firms can freely enter and exit the market.

Let us prove that in long term the only stable state of the market is one in which the economic profit of each firm tends to zero.

Let's consider 2 cases.

Case 1 ... The market price has developed in such a way that firms receive positive economic returns.

What will happen to the industry in the long term?

Since information is open and publicly available and there are no market barriers, the presence of positive economic returns from firms will attract new firms to the industry. Coming to the market, new firms shift the market supply to the right, and the equilibrium market price drops to a level at which the emerging opportunity for obtaining positive profits will not be completely exhausted.

Case 2 ... The market price has developed in such a way that firms receive negative economic returns.

In this case, everything will happen in the opposite direction: since firms receive negative economic profits, some of the firms will leave the industry, the supply will decrease, the price will rise to a level at which the economic profits of firms will not be zero.

Imperfect competition is an economic phenomenon, a market model in which manufacturing firms have the opportunity to exert real influence on the price of a product. On the other hand, there is the concept of perfect competition. This economic model is a system characterized by an infinite number of buyers and sellers, homogeneous and divisible products, high mobility of production resources, equal and complete information access of all participants to the price of products, goods, the absence of any obstacles to entry and exit to the market. Violation of at least one of these conditions theoretically means imperfect competition.

It is clear that achieving conditions of pure competition is practically impossible, while imperfect competition is a widespread phenomenon.

Imperfect competition as an economic phenomenon

Based on the properties inherent in the conditional model of perfect competition, it is possible to determine what features are inherent in imperfect competition and how they manifest themselves in real market conditions.

This structure is characterized by various kinds of barriers that restrict entry to and exit from a certain market sector. There are limitations in product pricing information. The product itself is either unique, or its properties are differentiated in comparison with others, which leads to the ability of producers and sellers to control prices for it: overstate, keep at a certain level. The goal is to maximize profit.

A striking example of imperfect competition is natural monopolies - firms whose activities are related to supplying the population with energy resources (electricity, gas). At low costs, such monopolists can set in the future any price for their products, while entry barriers to this market for newcomers are insurmountably high.

The characteristic features of market relations with imperfect competition are thus determined quite firmly:

Monopoly, small and medium business present on the market at the same time. They compete with each other, but the monopolists, to one degree or another, have an advantage in regulating prices. This applies to both buyers and sellers of the product.
In the long term, imperfect competition is aimed at monopolizing the market (sales, raw materials, labor market, etc.), in contrast to perfect competition, which is characterized by the main goal - the sale of goods.
The process of competition involves not only sales markets (retail, wholesale), but also production. Manufacturing innovation turns into a method of fighting the competition. The purpose of their implementation is to reduce production costs.
There are various methods of competitive struggle: from the use of price levers, as the most obvious ones, to non-price ones, aimed at improving the properties of goods, improving marketing and advertising policies. Non-economic methods are also used, which are commonly referred to as unfair competition.

Forms of competition for markets with imperfect competition, they have the following characteristics:

price- lowering prices for products, reducing the volume of costs in the production and marketing process, manipulating pricing, price maneuvers designed to attract a buyer;
non-price- emphasis on product quality, attracting customers through various promotions, offering a larger volume of goods or services for an equal price, non-standard advertising campaigns;
non-economic- industrial, economic espionage, bribery of responsible persons, etc.

Imperfect competition in all its diversity was considered in the works of E. Chamberlin, J. Hicks, J. Robinson, A. Cournot.

Forms of imperfect competition

Oligopoly characterized by a rather limited number of sellers of goods or services (communication services market). Oligopsony- a rather limited number of buyers (labor market in small towns). At monopolies there is only one seller on the market (gas supply). At monopsony- the only buyer (sale of heavy weapons).

At monopolistic competition there is a large number of manufacturers and sellers in the market sector selling products with similar properties, but not identical (most often found in retail, the sphere of consumer services).

Experts carry out a comparative analysis of these forms in the context of four market factors:

the number of sellers (producers);
differentiation of the market product;
opportunities to influence prices;
entry-exit barriers.

For example, in the case of a monopoly, there is only one quantitative indicator, prices are fully controlled, products have unique qualities, and barriers to market entry are very high, etc.

Labor market

Imperfect competition in the labor market is a complex phenomenon that includes several important factors. Note that this market sector is most susceptible to regulation in order to minimize the negative consequences of the "imperfect market".

Labor market regulatory factors:

State. Legally regulates the level wages, preventing him from completely falling under the influence of market processes (indexation of income, establishment of minimum wages, etc.).
Trade union organizations. They direct their efforts to increase the level of wages of workers in the industry, region, prepare and carry out the signing of agreements between trade unions and employers - market participants, in the indicated direction.
Large firms, corporations. The level of remuneration of specialists is established, which is retained for a long time. Not interested in frequent revision of the level of remuneration of employees.

Market laws work in a special way when applied to the labor market. The sale of labor, skills and abilities is fixed, as a rule, by a long-term employment contract, which gives job security to the employee, despite fluctuations in supply and demand. In addition, an individual labor contract or agreement cannot contain conditions worse than those enshrined in the collective agreement or in labor legislation.

In this case, the seller receives guarantees of employment, is withdrawn from market relations for the duration of the contract with the buyer.

The presence of restrictions on the worst conditions in comparison with the collective agreement does not allow the employer to infinitely worsen the terms of individual agreements, choosing the most "accommodating" sellers. This factor is most significant if there is a lack of trade union organization.

Imperfect competition and government regulation

Imperfect competition, being far from ideal models of building the economy, has its negative sides and consequences: an increase in product prices that is not justified by an increase in costs, an increase in production costs themselves, a slowdown in progressive trends, a negative impact on competitiveness on the scale of world markets, and finally, a slowdown in development economy.

At the state, government, level, there are always administrative barriers for market participants, for example, exclusive rights that the state gives to a particular company.

On a note! Regulatory barriers can be expressed in more than government regulation as such, but also in the possession of the right to rare natural resources, progressive scientific, technical developments, confirmed by a patent, a high level start-up capital required to enter the market sector.

At the same time, the state, realizing the global danger of market monopolization, is fighting it. Antimonopoly Regulatory Measures - a package of antimonopoly legislation that is constantly being improved, taking into account market trends. On the basis of it, administrative antimonopoly control of markets is carried out by authorized state antimonopoly structures. An effective mechanism for influencing monopolists is being developed.

Control is represented by a set of financial sanctions, the organizational mechanism does not affect the monopolists themselves, destroying them as a market phenomenon, but indirectly - by supporting small and medium-sized businesses, reducing customs duties, etc. large monopolies, for example, the merger of large firms in a particular market sector.

Outcomes

Imperfect competition, as opposed to a perfect, ideal model, exists in the real market structures of the modern economy. The purpose of imperfect competition is to capture the market, to monopolize it.
The forms of imperfect competition differ in the number of buyers and sellers in a given market sector. It is possible to conduct a comparative analysis of each form, paying attention to the level of barriers to entry into the market, the ability to influence prices, etc.
The labor market in conditions of imperfect competition is subject to many regulatory factors from the state, trade unions, and large companies.
The presence of an employment agreement leads to the temporary departure of the seller from the labor market, allows him to guarantee him stable employment, i.e. demand labor resources that he possesses.

The market economy is a complex and dynamic system with many connections between sellers, buyers and other participants in business relationships. Therefore, markets, by definition, cannot be homogeneous. They differ in a number of parameters: the number and size of firms operating in the market, the degree of their influence on the price, the type of goods offered, and much more. These characteristics determine types of market structures or else market models... Today it is customary to distinguish four main types of market structures: pure or perfect competition, monopolistic competition, oligopoly and pure (absolute) monopoly. Let's consider them in more detail.

Concept and types of market structures

Market structure- a combination of characteristic industry attributes of market organization. Each type of market structure has a number of characteristic features that affect how the price level is formed, how sellers interact in the market, etc. In addition, the types of market structures have varying degrees of competition.

Key characteristics of types of market structures:

the number of selling firms in the industry;
size of firms;
the number of buyers in the industry;
type of goods;
barriers to entry into the industry;
availability of market information (price level, demand);
the ability of an individual firm to influence the market price.

The most important characteristic of the type of market structure is level of competition, that is, the ability of a single selling company to influence the general market conditions. The more competitive the market, the lower the opportunity. Competition itself can be both price (change in price) and non-price (change in the quality of goods, design, service, advertising).

Can be distinguished 4 main types of market structures or market models, which are presented below in descending order of the level of competition:

perfect (pure) competition;
monopolistic competition;
oligopoly;
pure (absolute) monopoly.

Table with benchmarking the main types of market structure are shown below.

Table of the main types of market structures

Perfect (pure, free) competition

A market of perfect competition (English "Perfect competition") - characterized by the presence of many sellers offering a homogeneous product, with free pricing.

That is, there are many companies on the market offering homogeneous products, and each selling company, by itself, cannot influence the market price of these products.

In practice, and even on the scale of the entire national economy, perfect competition is extremely rare. In the XIX century. it was typical for developed countries, but in our time, only (and then with a reservation) agricultural markets, stock exchanges or the international currency market (Forex) can be attributed to the markets of perfect competition. In such markets, a fairly homogeneous product (currency, stocks, bonds, grain) is sold and bought, and there are a lot of sellers.

Features or conditions of perfect competition:

number of sales firms in the industry: large;
the size of the selling firms: small;
product: uniform, standard;
price control: none;
barriers to entry into the industry: practically nonexistent;
methods of competition: only non-price competition.

Monopolistic competition

Market of monopolistic competition (English "Monopolistic competition") - characterized by a large number of sellers offering a varied (differentiated) product.

In conditions of monopolistic competition, entry to the market is fairly free, there are barriers, but they are relatively easy to overcome. For example, to enter the market, a firm may need to obtain a special license, patent, etc. The control of the selling firms over the firms is limited. The demand for goods is highly elastic.

An example of monopolistic competition is the cosmetics market. For example, if consumers prefer Avon cosmetic products, they are willing to pay more for it than for similar cosmetics from other companies. But if the difference in price is too large, consumers will still switch to cheaper counterparts, such as Oriflame.

Monopolistic competition includes the food and light industry markets, the market medicines, clothes, shoes, perfumery. Products in such markets are differentiated - the same product (for example, a multicooker) may have many differences from different sellers (manufacturers). Differences can manifest themselves not only in quality (reliability, design, number of functions, etc.), but also in the service: availability warranty repair, free shipping, technical support, payment by installments.

Features or features of monopolistic competition:

number of sellers in the industry: large;
firm size: small or medium;
number of buyers: large;
product: differentiated;
price control: limited;
access to market information: free;
barriers to entry into the industry: low;
methods of competition: mainly non-price competition, and limited price competition.

Oligopoly

Oligopoly market (English "Oligopoly") - characterized by the presence on the market of a small number of large sellers, whose goods can be both homogeneous and differentiated.

Entering an oligopolistic market is difficult, and barriers to entry are very high. The control individual companies over limited prices. Examples of oligopoly are the automotive market, cellular markets, household appliances, metals.

The peculiarity of the oligopoly is that the decisions of companies on the prices of goods and the volume of its supply are interdependent. The market situation strongly depends on how companies react when the price of products is changed by one of the market participants. Possible two kinds of reaction: 1) follow-up reaction- other oligopolists agree with the new price and set prices for their goods at the same level (follow the initiator of the price change); 2) reaction of ignoring- other oligopolists ignore the price change by the initiating firm and maintain the same price level for their products. Thus, the oligopoly market is characterized by a broken demand curve.

Features or oligopoly terms:

number of sellers in the industry: small;
firm size: large;
number of buyers: large;
product: homogeneous or differentiated;
price control: significant;
access to market information: difficult;
barriers to entry into the industry: high;
competitive methods: non-price competition, very limited price.

Pure (absolute) monopoly

Pure monopoly market (English "Monopoly") - is characterized by the presence on the market of a single seller of a unique (having no close substitutes) product.

Absolute or pure monopoly is the exact opposite of perfect competition. Monopoly is the market for one seller. There is no competition. The monopolist has full market power: it sets and controls prices, decides how much of a product to offer to the market. Under a monopoly, the industry is essentially represented by just one firm. Market entry barriers (both artificial and natural) are almost insurmountable.

The legislation of many countries (including Russia) fights against monopolistic activities and unfair competition (collusion between firms in setting prices).

Pure monopoly, especially on a national scale, the phenomenon is very, very rare. Examples are small settlements (villages, townships, small towns), where there is only one store, one owner public transport, one railway, one airport. Or natural monopoly.

Special varieties or types of monopoly:

natural monopoly- a product in an industry can be produced by one firm at a lower cost than if many firms were engaged in its production (example: utilities);
monopsony- the only buyer on the market (monopoly on the demand side);
bilateral monopoly- one seller, one buyer;
duopoly- there are two independent sellers in the industry (such a market model was first proposed by A.O. Cournot).

Features or monopoly terms:

number of sellers in the industry: one (or two, if we are talking about a duopoly);
firm size: various (usually large);
number of buyers: different (there can be many or a single buyer in the case of a bilateral monopoly);
product: unique (has no substitutes);
price control: complete;
access to market information: blocked;
barriers to entry into the industry: almost insurmountable;
methods of competitive struggle: absent as unnecessary (the only thing is that a company can work on quality to maintain its image).

Galyautdinov R.R.

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What is pure competition? Description and definition of the concept.

Pure competition- this is a prosperous market environment, when there are many buyers and many sellers, and there is also a complete absence of monopoly.
When there is no obstacle to entering or exiting the market, information on the quality and price of a product is available to all market participants.

A large number of consumers and an abundance of goods cannot influence the price and quantity of products. Both the seller and the consumer depend on the dynamics of the market.

To have a higher profit from the sale of a product or product is to use some advanced technology, both in the manufacture of products and in their sale, which will cause a decrease in the cost price, and hence an increase in profits.

Pure, perfect, free competition is an idealized state of the market, an economic model, when individual buyers and sellers cannot influence the price, but form it by their input of supply and demand. That is, it is a type of market structure, where the market behavior of buyers and sellers lies in adjusting to the equilibrium state of market conditions.

Let's take a closer look at what pure competition means.

Distinctive features of pure competition

Signs of perfect competition:

divisibility and homogeneity of the products sold. It is understood that sellers or manufacturers produce such a product that can be completely replaced by the products of other market participants;
an infinite number of equal buyers and sellers. That is, all the demand that is on the market must be met not by one or several enterprises, as in the case of monopoly and oligopoly;
high mobility of factors of production. Pricing should not be influenced by the state or specific sellers or manufacturers. The price of a product should be determined by the cost of production, the level of demand, as well as supply;
no barriers to entering or entering the market. Examples can be a wide variety of areas of small business, where special requirements are not created and special licenses or other permits are not required. These include: an atelier, a shoe repair shop and the like;
full and equal access of all participants to information (about the price of goods).

In a situation where even one feature is absent, competition is imperfect. In a situation where these signs are removed artificially in order to gain a monopoly position in the market, the situation is called unfair competition.

One of the widely used types of unfair competition in some countries is giving bribes implicitly and explicitly to various representatives of the state in exchange for various kinds of preferences.

David Ricardo identified a trend that is natural in the conditions absolute competition, to a decrease in the economic profit of each seller.

The exchange market in the real economy resembles the market of perfect competition. Keynesians, observing the phenomena of economic crises, came to the conclusion that this form of competition usually suffers a fiasco, which can only be overcome with the help of external intervention.

Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is an important condition for development. modern business.

What is the best incentive for businesses to do this? exclusively and only the market. The market, in this understanding, is the competition arising between enterprises that manufacture or sell similar products.

In the case where there is enough high level adequate competition, this seriously affects the quality of goods or services sold in the market.

Because every manufacturer wants to be the best, so he is interested in ensuring that his products are of the highest quality, and the costs of their production are the lowest. This is a condition for being in a competitive market.

Perfect market competition

Perfect competition, as mentioned above, is the absolute opposite of monopoly.

In other words, this is a market in which an unlimited number of retailers operate, who sell the same or similar goods and, at the same time, cannot influence its final cost in any way.

The state, in turn, should not influence the market or engage in full regulation of it, since this can affect the number of sellers, as well as the volume of products on the market, which will instantly affect the cost per unit of production (goods or services).

However, unfortunately, such ideal conditions for doing business in real market conditions cannot exist for a long time. That is, perfect competition is a fickle and temporary phenomenon. Ultimately, the market becomes either an oligopoly or some other kind of imperfect competition.

Perfect competition can lead to decline. This may be due to the fact that in the long term there is a constant decline in prices. The human resource in the world is quite large, while the technological one is very limited.

Over time, all enterprises will gradually go through the process of modernization of all major production assets and all production processes, and the price will still continue to fall due to the attempts of competitors to conquer a larger market.

And this will already lead to functioning on the verge of the break-even point or below it. The market can be saved only by outside influence.

Perfect competition is extremely rare. IN real world it is impossible to give examples of firms of perfect competition, since a market that functions in this way simply does not exist. Although, there are some segments that are as close as possible to its conditions.

To find such examples, it is necessary to find the markets in which small businesses mainly operate. As already mentioned, if any company can enter the market where this segment operates, and it is also easy to exit it, then this is a sign of perfect competition.

If we talk about imperfect competition, then monopoly markets are a bright representative of it. Enterprises that operate in such conditions have no incentive to develop and improve. In addition, they produce such goods and provide such services that cannot be replaced by any other product.

An entire sector of the economy can be called an example of such a market - the oil and gas industry, and the monopoly company is Gazprom. An example of a perfect competition market is the car repair industry. There are a lot of all kinds of service stations and auto repair shops, both in the city and in other settlements.

The same services are provided almost everywhere, and approximately the same amount of work is performed. If there is perfect competition in the market, then it becomes impossible to artificially raise the prices of goods in the legal field. We see examples of this in everyday life, in ordinary markets.

For example, one fruit seller raised the price of apples by 10 rubles, although their quality is the same as that of competitors, in which case buyers will not buy goods from him at that price. If the monopolist has an influence on the price, raising or lowering it, then in this case such methods are not suitable.

In perfect competition, you cannot raise the price yourself, unlike a monopoly enterprise. Due to competition in the market, you cannot simply increase the price, since all customers will look for a more profitable purchase of goods for themselves. Thus, an enterprise can lose its market share, and this will entail disastrous consequences.

Some people, however, reduce the cost of the offered goods. This is done in order to "win back" new market shares and increase the level of income. In order to lower prices, it is necessary to reduce the cost of raw materials.

And this, in turn, is possible due to the use of new technologies, production optimization and other processes, it is they that allow saving raw material costs. In Russia, markets that are close to perfect competition do not develop fast enough.

Examples of perfect economics can be found in almost all areas of small business. If we talk about the domestic market, then we can see that a perfect economy in it is developing at an average pace, but it could have been better.

Weak support from the state significantly hinders its development, since so far many laws are focused on supporting large producers, which in turn are monopolists.

Therefore, the small business sector remains without special attention and without proper funding.

Perfect competition, examples of which are listed above, is the ideal form of competition from the side of understanding the criteria for pricing, supply and demand. Nowadays, not a single country, not a single economy in the world can boast of such a market that would meet absolutely all the requirements that a market must necessarily meet in perfect competition.

We briefly reviewed what pure competition is, its distinctive features, and examples in the global market. Leave your comments or additions to the material.

Competition(Lat. concurrentia, from Lat. concurro - I run, I collide) - struggle, rivalry in any area. In economics, it is a struggle between economic agents for the most efficient use of production factors.

Competitiveness- the ability of a certain object or subject to surpass competitors in given conditions.

The lower the firm's ability to influence the market, the more competitive the industry is considered. In the extreme case, when the degree of influence of one firm is equal to zero, one speaks of a perfectly competitive market.

In scientific language, there are two different understandings of the term "competition". Competition as a characteristic of the market structure (market competitiveness, perfect, monopolistic competition) and competition as a way of interaction between firms in the market (competition, price and non-price competition).

The terms used to designate various types of market structures come from the Greek language and characterize, on the one hand, the belonging of economic entities to sellers or buyers (poleo - I sell, psoneo - I buy), and on the other - their number (mono - one, oligos - several, poly - a lot).

Since the structure of a particular market is determined by many factors, the number of market structures is practically unlimited.

To simplify the analysis in economic theory, it is customary to distinguish four basic models:

perfect competition;
pure monopoly;
monopolistic competition;
homogeneous and heterogeneous oligopoly

Perfect competition

Perfect competition is a state of the market in which there are a large number of buyers and sellers (producers), each of whom occupies a relatively small market share and cannot dictate the conditions for the sale and purchase of goods.

It is assumed that the necessary and accessible information about prices, their dynamics, sellers and buyers not only in this place, but also in other regions and cities.

The market of perfect competition presupposes the absence of the producer's power over the market and the establishment of the price not by the producer, but through the supply and demand function.

The features of perfect competition are not fully inherent in any of the industries. All of them can only approach the model.

The signs of an ideal market (market of ideal competition) are:

the absence of entry and exit barriers in a particular industry;
no restrictions on the number of market participants;
homogeneity of the products of the same name on the market;
free prices;
lack of pressure, coercion from some participants in relation to others

Creating the ideal model of perfect competition is an extremely complex process. Agriculture is an example of an industry close to a perfectly competitive market.

Imperfect competition

Imperfect competition - competition in an environment where individual producers have the ability to control the prices of the products they produce. Perfect competition is not always possible in the market. Monopoly competition, oligopoly and monopoly are forms of imperfect competition. With a monopoly, it is possible for the monopolist to oust other firms from the market.

The signs of imperfect competition are:

dumping prices
creation of entry barriers to the market of any goods
price discrimination (selling the same product at different prices)
use or disclosure of confidential scientific, technical, production and trade information
dissemination of false information in advertising or other information regarding the method and place of manufacture or the quantity of goods
suppression of information important to the consumer

Losses from imperfect competition:

unjustified rise in prices
increase in production and distribution costs
slowdown in scientific and technological progress
decrease in competitiveness in world markets
decline in the efficiency of the economy.

Monopoly

Monopoly is the exclusive right to something. With regard to the economy - the exclusive right to production, purchase, sale, belonging to one person, a certain group of persons or the state.

It arises on the basis of high concentration and centralization of capital and production. The goal is to generate ultra-high profits. Provided by setting monopoly high or monopoly low prices.

Suppresses competitive potential market economy, leads to higher prices and imbalances.

Monopoly model:

the only seller;
lack of close substitute products;
dictated price.

It is necessary to distinguish natural monopoly, that is, structures, the demonopolization of which is either impractical or impossible: utilities, underground, energy, water supply, etc.

Monopolistic competition

Monopoly competition occurs when many sellers compete to sell a differentiated product in a market where new sellers are likely to emerge.

A market with monopolistic competition is characterized by the following:

the product of each firm trading on the market is an imperfect substitute for the product sold by other firms;
there are a relatively large number of sellers in the market, each of whom satisfies a small but not microscopic share of the market demand for a general type of product sold by the firm and its competitors;
sellers in the market do not take into account the reaction of their rivals when they choose what price to set for their goods or when they choose guidelines for the volume of annual sales;
the market has conditions for entry and exit

Monopoly competition is like a monopoly situation in that individual firms have the ability to control the price of their goods. It also looks like perfect competition, since every product is sold by many firms and there is free entry and exit in the market.

Oligopoly

Oligopoly is a type of market in which not one but several firms dominate in each branch of the economy. In other words, there are more producers in an oligopolistic industry than under a monopoly, but significantly less than under perfect competition.

As a rule, there are 3 or more participants. Duopoly is a special case of oligopoly. Price control is very high, high barriers to entry into the industry, significant non-price competition. Examples include cellular operators and the housing market.

Antitrust Policy

All developed countries of the world have antitrust laws that restrict the activities of monopolies and their associations.

Antimonopoly policy in European countries is more aimed at regulating already established monopolies, regardless of the ways in which they achieved their monopoly position, and this regulation does not imply structural changes, that is, it does not contain requirements for deconcentration, fragmentation of firms into independent enterprises.

For the US state antitrust policy, first of all, and of course, such a position is characteristic, according to which it is not at all necessary to deprive a firm of monopoly high profits if it has achieved a monopoly position in the market “due to higher business qualities, ingenuity or just a lucky chance. "

In addition to price regulation, a certain benefit - especially in Russia - can be brought about by reforming the structure of natural monopolies.

The fact is that in Russia, within the framework of a single corporation, both the production of natural monopoly goods and the production of such goods that are more efficient to produce in competitive conditions are often combined.

This association is, as a rule, of the nature vertical integration... As a result, a giant monopoly is formed, representing the whole sphere of the national economy.

On the whole, the system of antimonopoly regulation in Russia is still in its infancy and requires radical improvement. In Russia, the antimonopoly regulation body is the Federal Antimonopoly Service of Russia.

Objects that are competitive can be divided into four groups:

goods,
enterprises (as manufacturers of goods),
industries (as a collection of enterprises offering goods or services),
regions (districts, oblasts, countries or their groups).

In this regard, it is customary to talk about such types of it as:

National competitiveness
Competitiveness of goods
Enterprise competitiveness

In addition, in principle, four types of subjects can be distinguished that assess the competitiveness of certain objects:

consumers,
manufacturers,
investors,
state.

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Perfect and imperfect competition: essence and characteristics

Evgeny Malyar

# Business vocabulary

In reality, competition is always imperfect, and is divided into types, depending on which condition corresponds to the market to a greater extent.

Characteristics of perfect competition
Signs of perfect competition
Conditions close to perfect competition
The pros and cons of perfect competition
Advantages
Flaws
A market of perfect competition
Imperfect competition
Signs of imperfect competition
Types of imperfect competition

Everyone is familiar with the concept of economic competition. This phenomenon is observed at the macroeconomic and even everyday level. Every day, choosing this or that product in the store, each citizen, willing or not, participates in this process. And what kind of competition is there, and, finally, what is it all about from a scientific point of view?

Characteristics of perfect competition

To begin with, a general definition of competition should be adopted. About this objectively existing phenomenon, accompanying economic relations from the moment of their inception, various concepts have been put forward, from the most enthusiastic to completely pessimistic.

According to Adam Smith, expressed in his "Investigations of the Nature and Causes of the Wealth of Nations" (1776), competition with its "invisible hand" transforms the selfish motives of the individual into socially useful energy. The theory of a self-regulating market presupposes the denial of any state intervention in the natural course of economic processes.

John Stuart Mill, being also a great liberal and a supporter of the maximum individual economic freedom, was more careful in his judgments, comparing competition with the sun. Probably, this outstanding scientist also understood that on a too hot day, a little shade is also a blessing.

Any scientific concept presupposes the use of idealized instruments. Mathematicians refer to this as a “line” that has no width or a dimensionless (infinitely small) “point”. Economists have a concept of perfect competition.

Definition: Competition is the competitive interaction of market participants, each of whom strives to get the greatest profit.

As in any other science, in economic theory, a certain ideal market model is adopted, which does not fully correspond to realities, but allows one to study the ongoing processes.

Signs of perfect competition

The description of any hypothetical phenomenon requires criteria to which the real object must (or can) strive. For example, doctors consider healthy person with a body temperature of 36.6 ° and a pressure of 80 to 120. Economists, listing the features of perfect competition (it is also called pure), also rely on specific parameters.

The reasons why it is impossible to achieve the ideal are not important in this case - they are inherent in human nature itself. Every entrepreneur, having received certain opportunities to establish their positions in the market, will definitely take advantage of them. And yet, hypothetical perfect competition is characterized by the following features:

An infinite number of equal participants, which are understood as sellers and buyers. The convention is obvious - nothing unlimited does not exist within our planet.
None of the sellers can influence the price of the product. In practice, there are always the most powerful actors capable of carrying out commodity interventions.
The proposed commercial product has properties of homogeneity and divisibility. Also purely theoretical assumption. An abstract product is something like grain, but it can be of different quality.
Complete freedom of participants to enter or leave the market. In practice, this is sometimes observed, but by no means always.
Possibility of smooth movement of production factors. To imagine, for example, a car factory that can be easily transferred to another continent, of course, is possible, but imagination is required for this.
The price of a product is formed exclusively by the ratio of supply and demand, without the possibility of the influence of other factors.
And, finally, full public availability of information on prices, costs and other information, which in real life is most often a commercial secret. There are no comments at all here.

After considering the above signs, conclusions arise:

Perfect competition in nature does not exist and cannot even exist.
The ideal model is speculative and necessary for theoretical market research.

Conditions close to perfect competition

The practical usefulness of the concept of perfect competition lies in the ability to calculate the optimal equilibrium point of a firm, taking into account only three indicators: price, marginal cost, and minimum gross costs.

When these figures are equal to each other, the manager gets an idea of the dependence of the profitability of his enterprise on the volume of production.

This intersection point is clearly illustrated by the graph on which all three lines converge:

Where: S is the amount of profit; ATC is the minimum gross cost; A is the equilibrium point; MC is the marginal cost; MR is the market price of the product;

Q is the volume of production.

The pros and cons of perfect competition

Since perfect competition as an ideal phenomenon in the economy does not exist, its properties can be judged only by individual signs that appear in some cases from real life (with the maximum possible approximation). Contemplative reasoning will also help to determine its hypothetical advantages and disadvantages.

Advantages

Ideally, such a competitive relationship could contribute to the rational allocation of resources and the achievement of the highest efficiency of production and commercial activities.

The seller is forced to reduce costs, since the competitive environment does not allow him to increase the price.

In this case, new economical technologies, high organization of work processes and all-round frugality can serve as means of achieving advantages.

In part, all this is observed in real conditions of imperfect competition, but there are examples of a literally barbaric attitude to resources on the part of monopolies, especially if control by the state is weak for some reason.

An illustration of the predatory attitude towards resources is the activities of the United Fruit company, which for a long time ruthlessly exploited the natural resources of the countries of South America.

Flaws

It should be understood that even in an ideal form, perfect (aka pure) competition would have systemic flaws.

First, its theoretical model does not provide for economically unjustified spending on achieving public goods and raising social standards (these costs do not fit into the scheme).
Secondly, the consumer would be extremely limited in the choice of a generalized product: all sellers offer virtually the same thing and at approximately the same price.
Third, an infinitely large number of producers leads to a low concentration of capital. This makes it impossible to invest in large-scale resource-intensive projects and long-term scientific programs, without which progress is problematic.

Thus, the position of the firm in conditions of pure competition, as well as of the consumer, would be very far from ideal.

A market of perfect competition

The closest to the idealized model at the present stage is the exchange type of the market. Its participants do not have bulky and inert assets, they easily enter and leave the business, their product is relatively homogeneous (estimated by quotes).

There are many brokers (although their number is not infinite) and they operate mainly in terms of supply and demand. However, the economy does not consist only of exchanges.

In reality, the competition is imperfect, and is divided into types, depending on which condition corresponds to the market to a greater extent.

Profit maximization in conditions of perfect competition is achieved exclusively by price methods.

The characterization and model of the market is important for determining the possibilities of functioning in an imperfectly competitive environment. It is hard to imagine that a huge number of sellers offer absolutely the same type of product that is in demand with an unlimited number of buyers. This is the ideal picture, suitable only for conceptual reasoning.

In real life, competition is always imperfect. In this case, only one common feature markets of perfect and monopolistic competition (the most widespread) and it consists in the adversarial nature of the phenomenon.

There is no doubt that business entities strive to achieve advantages, take advantage of them and develop success up to the full mastery of all possible sales volumes.

Otherwise, perfect competition and monopoly are very different.

Signs of imperfect competition

Since the ideal model of "capitalist competition" has been discussed above, it remains to analyze its differences with what happens in a functioning world market. The main signs of real competition include the following points:

The number of manufacturers is limited.
Objectively, there are barriers, natural monopolies, fiscal and licensing restrictions.
Market entry can be difficult. Exit too.
Products are produced in a variety of quality, price, consumer properties and other characteristics. However, they are not always divisible. Is it possible to build and sell half of a nuclear reactor?
The mobility of production takes place (in particular, in the direction of cheap resources), but the processes of moving capacities themselves are quite costly.
Individual participants have the ability to influence the market price of a product, including by non-economic methods.
Technology and pricing information is not publicly available.

From this list it is clear that real conditions modern market are not just far from the ideal model, but often contradict it.

Types of imperfect competition

Like any imperfect phenomenon, imperfect competition is characterized by a variety of forms. Until recently, economists have simplified them according to the principle of functioning into three categories: monopoly, oligopoly and monopoly, but now two more concepts have been introduced - oligopsony and monopsony.

These patterns and types of imperfect competition deserve detailed consideration.

Monopsony

This type of imperfect competition occurs when only one consumer can purchase a manufactured product.

There are types of products intended, for example, exclusively for government agencies (powerful weapons, special equipment). By economic sense, monopsony is the opposite of monopoly.

This is a kind of dictate of a single buyer (and not a manufacturer), and it does not occur often.

A phenomenon is also emerging in the labor market. When there is only one working in the city, for example, a factory, then an ordinary person has limited opportunities to sell his labor.

Oligopsony

It is very similar to monopsony, but there is a choice of buyers, albeit small. Most often, such imperfect competition occurs between manufacturers of components or ingredients intended for large consumers.

For example, some prescription component can only be sold to a large confectionery factory, and there are only a few of them in the country.

Another option is that the tire manufacturer seeks to interest one of the car factories for the regular supply of its products.

As a result, let us note that any competition that exists in real conditions is as imperfect as the market itself. From the point of view of economic theory, perfect competition is a simplified concept. It is far from ideal, but necessary. It doesn't surprise anyone that physicists use different mathematical models and scientific assumptions?

Imperfect competition is diverse in forms, and it is possible that new ones will be added to the existing ones in the future.

Perfect competition

Competition is basic concept economy. It refers to the rivalry of subjects (companies, organizations, firms or individuals) in any segment of the economy in order to capture the market and make a profit.

Economists distinguish two types of competition:

Perfect
Imperfect (monopoly, oligopoly and absolute monopoly).

This article discusses perfect competition in detail.

Definition of perfect competition

Perfect (pure) competition is a market model in which many buyers and sellers interact. Moreover, all subjects of market relations have equal rights and opportunities.

Let's imagine that there is a market for rye flour. Sellers (5 firms) and buyers interact on it. The rye flour market is designed so that it can be easily entered new member offering its products. In this market model, there is perfect (pure) competition.

A distinctive feature of the pure competition market is that the seller and the buyer cannot influence the price of a product. The price of a product is determined by the market.

Prerequisites for Perfect Competition

In order for the same product to have the same price from different sellers at the same time, the following conditions must be met:

1. Market uniformity; 2. Unlimited number of sellers and buyers of the product; 3.

No monopoly (one influential manufacturer who captured the lion's share of the market) and monopsony (the only buyer of the product); 4.

The prices for the goods are set by the market, not by the state or interested parties; 5. Equal opportunities for conducting economic and economic activities for all members of society;

6. Open information about the main economic performance all market players. It is about the demand, supply and prices of a product. In a market of pure competition, all indicators are considered fair;

7. Mobile factors of production;

8. The impossibility of a situation when one market entity influences the rest by non-economic methods.

If the listed conditions are met, perfect competition is established on the market. Another thing is that in practice this does not happen. Next, let's see why.

Pure Competition - Abstraction or Reality?

In real life, there is no perfect competition. Any market consists of living people who pursue their own interests and have leverage over the process. There are three main barriers that prevent a new firm from entering the market just like that:

Economic. Trade marks, brands, patents and licenses. Organizations that have been on the market for a long time are sure to patent their product.

This is done so that newbie firms cannot simply copy the product and start a successful trade; Bureaucratic. For any number of roughly equal producers, a dominant firm is always distinguished.

It is she who has the power in the market and sets the price of the product;

Mergers and acquisitions. Large enterprises are buying up new, developing firms. This is done to introduce new technologies and expand the range of the enterprise under one brand. An effective way to compete against successful newbies.

Economic and bureaucratic obstacles significantly increase the cost of entry for newcomers to the market. CEOs ask themselves questions:

1. Will the income from the sale of products cover the costs of promotion and development?
2. Will my business be profitable?

The purpose of barriers to entry is to prevent new businesses from gaining a foothold in the market. In theory, any enterprise can become a new monopolist. Such cases have taken place in history. Another thing is that in percentage terms it will be 1-2% out of 100% of new enterprises.

Markets close to pure competition

If pure competition is an abstraction, why is it needed? An economic model is needed in order to study the laws of the market and more complex types of competition. In economics, perfect competition plays a very important role:

1. In some markets there is near perfect competition. This includes agriculture, securities and precious metals. Knowing the perfect competition model, it is quite easy to predict the fate of a new firm.
2. Pure competition is a simple economic model. It allows comparison with other types of competition.

Perfect competition, like other types of rivalry between economic agents, is an integral part of market relations.

Perfect competition. Examples of perfect competition

Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is an important condition for the development of modern business. What's the best way to get businesses to do all this? Market only.

The market refers to the competition that arises between enterprises that produce or sell similar goods. If there is a high level of healthy competition, then in order to exist in such a market, it is necessary to constantly improve the quality of goods and reduce the level of overall costs.

Perfect competition concept

Perfect competition, examples of which are given in the article, is the complete opposite of monopoly. That is, this is a market in which an unlimited number of sellers operate, who deal with the same or similar goods and at the same time cannot influence its price.

At the same time, the state should not influence the market or engage in its complete regulation, since this can affect the number of sellers, as well as the volume of products on the market, which is immediately reflected in the price per one unit of goods.

Despite the seemingly ideal conditions for doing business, many experts are inclined to believe that in real conditions, perfect competition will not be able to exist on the market for a long time. Examples that confirm their words have happened more than once in history. In the end, the market became either an oligopoly or some other form of imperfect competition.

Perfect competition can lead to decline

This is due to the fact that in the long term there is a constant decline in prices. And if human resource in the world is large, but the technological is very limited. And sooner or later, enterprises will move on to modernizing all fixed assets and all production processes, and the price will still fall due to the attempts of competitors to conquer a larger market.

And this will already lead to functioning on the verge of the break-even point or below it. It will be possible to save the situation only by influence from outside the market.

The main features of perfect competition

The following features can be distinguished that a market of perfect competition should have:

- a large number of sellers or manufacturers of products. That is, all the demand that is on the market must be met not by one or several enterprises, as in the case of monopoly and oligopoly;

- products on such a market must be either homogeneous or interchangeable. It is understood that sellers or manufacturers produce such a product that can be completely replaced by the products of other market participants;

- prices are set only by market means and depend on supply and demand. Pricing should not be influenced by the state or specific sellers or manufacturers. The price of a product should be determined by the cost of production, the level of demand, as well as supply;

- there should be no barriers to entry or entry into the market of perfect competition. Examples can be very different from the sphere of small business, where special requirements are not created and special licenses are not needed: atelier, shoe repair services, etc.;

- there should be no other outside influences on the market.

Perfect competition is extremely rare

In the real world, examples of firms with perfect competition cannot be given, since there is simply no market that operates by such rules. There are segments that are as close as possible to its conditions.

To find such examples, it is necessary to find the markets in which small businesses mainly operate. If any firm can enter the market where it operates, and it is also easy to exit from it, then this is a sign of such competition.

Examples of perfect and imperfect competition

If we talk about imperfect competition, then monopoly markets are a bright representative of it. Enterprises that operate in such conditions have no incentive to develop and improve.

In addition, they produce such goods and provide such services that cannot be replaced by any other product. This explains the poorly controlled price level, which is set in a non-market way. An example of such a market is the whole sector of the economy - the oil and gas industry, and the monopoly company is OJSC Gazprom.

An example of a perfect competition market is the car repair service. There are a lot of different service stations and garages both in the city and in other settlements. The type and amount of work performed are almost the same everywhere.

It is impossible in the legal field to artificially increase the prices of goods if there is perfect competition on the market. Examples confirming this statement, everyone has seen in his life more than once in the ordinary market. If one seller of vegetables raised the price of tomatoes by 10 rubles, while their quality is the same as that of competitors, then buyers will stop buying from him.

If, under a monopoly, the monopolist can influence the price by increasing or decreasing supply, then in this case such methods are not suitable.

With perfect competition, you cannot raise the price on your own, as a monopolist enterprise can do.

Due to the large number of competitors, it is impossible to simply increase the price, since all customers will simply switch to purchasing the corresponding goods from other enterprises. Thus, an enterprise can lose its market share, which will entail irreversible consequences.

In addition, in such markets, there is a decrease in the prices of goods by individual sellers. This is in an attempt to "win back" new market shares to increase income levels.

And in order to reduce prices, it is necessary to spend less raw materials and other resources on the production of one unit of production. Such changes are possible only due to the introduction of new technologies, production optimization and other processes that can reduce the cost of doing business.

In russia, markets that are close to perfect competition do not develop fast enough

The main problem is the weak support of the state, since so far many laws are focused on supporting large producers, who are often monopolists.

In the meantime, the small business sector remains without special attention and the necessary funding.

Perfect competition, examples of which are given above, is the ideal form of competition from the side of understanding the criteria of pricing, supply and demand. Today, no economy in the world can find such a market that would meet all the requirements that must be observed in perfect competition.

No related posts.

Perfect competition concept

can lead to decline

This is due to the fact that prices are constantly decreasing. And if the human resource in the world is large, then the technological one is very limited. And sooner or later, enterprises will move to the fact that all fixed assets and all production processes will be modernized, and the price will still fall due to the attempts of competitors to conquer a larger market.

And this will already lead to functioning on the verge of the break-even point or below it. It will be possible to save the situation only by influence from outside the market.

The main features of perfect competition

The following features can be distinguished that a market of perfect competition should have:

A large number of sellers or manufacturers of products. That is, all the demand that is on the market must be met not by one or several enterprises, as in the case of monopoly and oligopoly;

Products in such a market must be either homogeneous or interchangeable. It is understood that sellers or manufacturers produce such a product that can be completely replaced by the products of other market participants;

Prices are set only by market means and depend on supply and demand. Pricing should not be influenced by the state or specific sellers or manufacturers. The price of a product should be determined by the level of demand as well as supply;

There should be no barriers to entry or entry into the market of perfect competition. Examples can be very different from the sphere of small business, where special requirements are not created and special licenses are not needed: atelier, shoe repair services, etc.;

There should be no other outside influences on the market.

Perfect competition is extremely rare

Examples of perfect and imperfect competition

If we talk about imperfect competition, then monopoly markets are a bright representative of it. Enterprises that operate in such conditions have no incentive to develop and improve.

In addition, they produce such goods and provide such services that cannot be replaced by any other product. This explains the poorly controlled, established non-market way. An example of such a market is a whole sector of the economy - the oil and gas industry, and the monopoly company is Gazprom.

If at can influence the price by increasing or decreasing supply, then in this case such methods are not suitable.

With perfect competition, you cannot raise the price on your own, as a monopolist enterprise can do.

In addition, in such markets, there is a decrease in the prices of goods by individual sellers. This is in an attempt to "win back" new market shares to increase income levels.

And in order to reduce prices, it is necessary to spend less raw materials and other resources on the production of one unit of production. Such changes are possible only due to the introduction of new technologies and other processes that can reduce the cost of doing business.

In Russia, markets that are close to perfect competition are not developing fast enough

If we talk about the domestic market, perfect competition in Russia, examples of which are found in almost all spheres of small business, is developing at an average pace, but it could have been better. The main problem is the weak support of the state, since so far many laws are focused on supporting large producers, who are often monopolists. In the meantime, the small business sector remains without special attention and the necessary funding.