Question

Discuss the main assumptions of perfect competition and monopolistic competition.

Discuss the impact of Covid-19 on small grocery stores. Compare this with big businesses like Woolworths and Coles. Highlight the impact of the crisis using the models on market structure (hint: think of models on perfect competition, monopoly, monopolistic competition, oligopoly).

Answer 1

COVID 19 the pandemic affects most parts of the world. Here we are focusing on the grocery sector. In remote areas most of the people depends on the small groceries for their daily consumption. This pandemic leads lockdown for long period. This time the common people does not have an option to go out and purchase there necessary goods. On the other hand, below average people are also the owners of these small shops. There is huge demand fall occurred in grocery sector and the whole market structure. If we are comparing this with the large grocery business companies like Woolworths and Coles. These companies provide a large platform in the virtual world for this grocery market. The people who are settled in the cities mainly depends this kind of online platforms for their daily needs. So even in lockdown periods this companies earned profit through this.
By taking the monopolistic competitive market system, this market situation the demand curve slope will change in accordance with the elasticity of demand. Under this situation the market demand is perfectly inelastic. In monopolistic market there is freedom for entry and exit. So new firms were entered to the market leads to increasing level of competition. Each individual firm tried to provide quality goods to maintain status in the market. There is a drastic change created in the online and virtual market due to the pandemic.