Question

Explain imperfect and perfect competition?

Answer 1

If we talk about perfect competitive markett thenit is a market structure type in which

1. there is large number of buyers and sellers in the market
2. price is only decided by the market forces that is demand and supply
3. there are no barriers to entry and exit in the market
4. it is a single price market
5. it is assume that all buyers and sellers have full knowledge about the market

The best example of this market can be vegetable or fruit market where products are homogeneous in nature

If we talk about imperfect market then it is just opposite of the perfect market

The best example of this is Monopoly

Monopoly is a market structure type in which-

1. there is single seller and large number of buyers in the market
2. the single seller is the only price maker
3. there are barriers to entry and exit in the market
4. long term economic profit is positive

It is a situation of generally a market failure because law of supply and demand do not work efficiently to have a proper balance in the market and dominance is controlled by the only seller in the market