Characteristics of Market Types
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ScribdTranslationsCharacteristics of Market Types
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ScribdTranslationsPERFECT AND IMPERFECT MARKET
WHAT IS THE PERFECT MARKET?
It is the structure of an industry where many companies are involved, each one
of them is small in relation to the industry, they practically produce the
same products and no company is large enough to have a
high-level price control.
(Verbal explanation)
This refers to the conditions of the quality of what is being negotiated, which comes
being the same for all providers and demanders and the information
Prices and volumes are also within everyone's reach. The auction floor
it fosters the Perfect Market, although obviously, the analysis of the information
what is within everyone's reach is not the same, nor are the conclusions drawn from it
they are obtained.
PERFECT MARKET STRUCTURE
They are classified into 4 main structures which are:
Perfect competition.
2. Monopolistic competition.
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4. Monopoly.
We will emphasize perfect competition, because the other colleagues
They will explain the rest of the structure in detail.
PERFECT COMPETITION
It is the situation of a market where companies lack the power to
manipulate the price and a maximization of well-being occurs.
Verbal explanation: Definition of perfect competition.
It is the meeting point between supply and demand. In a competitive market
the perfect market price is independent of the level of production that
have a company.
Slides.
EXAMPLE OF PERFECT COMPETITION
In a perfectly competitive market, a company would produce as much as
I want to enter for each unit sold, being clear that this price is
previously set by the market conditions themselves. As for the curve
of industry demand, it would have a negative slope.
(Verbal explanation) of the example
This is because their offering is a small part of the market, and the demand
what corresponds to it is also a minority, compared to the total market.
CHARACTERISTICS OF PERFECT MARKET.
No company can have superiority over the others.
No one influences the prices.
Product homogeneity.
Absence of marketing.
Total transparency.
Mobility of resources.
Verbal explanation
The perfect market has a structure based on the following assumptions:
There is a large number of suppliers and demanders.
There can be no company with superiority over others:
All compete in the market on equal terms, so the
the market is not centered in a few hands that influence the final price.
This is what would happen in a monopoly, where one company would exploit.
exclusively some part of the commerce. Another modality would be the
oligopoly. In it, the number of sellers is reduced, so that
they handle the sales of certain products as if they were a
it was a monopoly.
Nobody influences the prices: Neither the buyer nor the seller. It is the
the market itself sets the price, so that it is not too high
– because it can terrify consumption and encourages production in a way
excessive, nor can it be too low, because it demotivates the
production and excessively promotes the consumption of a certain product.
3. Product homogeneity: This means that, in each place of
market, the product is the same. The consumer should not care whether to buy the
product that the other one. In this idyllic market there are no campaigns of
marketing. Sellers do not make their products follow a
improvement strategy compared to its competitors, as it goes against
from the requirement of product homogeneity.
4. Absence of marketing The producers and sellers do not dedicate
time to develop a marketing strategy to differentiate your products
of the competition, since this would go against the requirement of
homogeneity. In this way, they do not develop fixation strategies either.
of prices and sales promotion programs such as advertising.
5. Total transparency. Economic agents (a person or an entire
company) know the prices and characteristics of the products, in order to
ensure that the purchasing decision is appropriate and rational.
6. Mobility of resources: That the subjects are accessible in others
regions and under equal conditions, in addition to which companies can
entering or leaving the market without restrictions.
IS THE PERFECT MARKET FEASIBLE?
Currently, such a market has a difficult establishment. For it to
perfect competition takes place, companies must first achieve
maximize their profit or well-being.
(Verbal explanation) Continuation
In this way, the market balances and the supply of products equals the
demand. Unfortunately, there are many companies that engage directly or
indirectly the control over the different places in the market, and the
perfect competition is not always sincere. This type of market does not help to
provide corrections if inequalities arise in the distribution of the
income.
CONSEQUENCES OF PERFECT COMPETITION MARKET
Positive. The increase in the well-being of all members of the chain.
it is guaranteed, since free competition without interference from anyone
An element that generates inequalities grants a homogeneous consumption.
Negatives. Without the pressure of competitiveness, the innovation of the
markets decline and stagnate, eventually reducing supply of
products and services, and discouraging technological investment.
EXAMPLES OF PERFECT MARKET
Agriculture sector.
Bakery.
Cleaning and sanitation products.
(Verbal explanation)
Agriculture sector.
It has identical, similar products with millions and millions of
consumers. Their prices do not have significant variations, as they are
governed by government entities.
Bakery.
The prices of breads do not vary between the bakeries that exist within.
from the same community. It has infinite consumers and the products are
equal.
Cleaning and hygiene products.
They are in high demand and have an ease of entering the market. Additionally
There are many options and prices remain stable.
WHAT IS THE IMPERFECT MARKET?
It is a market situation in which sellers or companies
they compete, they have some control over the price because they are offered
different products and limit the supply.
(Verbal explanation)
In this type of market, there is incomplete market information and
emotional buying behavior, so companies use the
offers to inform, persuade, or remind your market why they should
buy their products and the benefits they have.
CHARACTERISTICS OF IMPERFECT MARKET
Low degree of concentration of companies: Number of companies is
minor.
Sellers influence prices: They change product prices
contradicting the spirit of the free market.
Product differentiation: These products are perceived differently.
due to peculiar designs, different utility from one product to another.
Incomplete information in the market: Buyers and sellers have
different information about the product.
High prices and low production levels: Sellers manipulate
The prices of the products cause demand to decrease.