Question

a) What is the characteristics of a perfectly competitive market.

b) Using the concepts in Part (a) above, decide on the type of market structure for the following:

1. Sunkist, a producer for juice beverages in Malaysia.
2. A farmer who produces corn in the Northern-states of the Peninsular Malaysia.

c) Which of these market structures is the most prevalent in the Malaysian economy? Justify your answer.

Answer 1

a] A perfectly competitive market has large number of buyers and sellers. The buyers are aware of the market prices of the product. Since the sellers are selling identical products, they cannot charge different price for the product.New firms can easily enter the market if the have enough factors of production with them. They can easily exit the market to avoid losses.Agricultural market is the best example for perfect competition.

b] i. Sunkist, a producer for juice beverages in Malaysia does not exactly come under perfectly competitive market as the products are exactly not similar with regard to taste, contents, packaging etc. It comes under imperfect oligopoly market .They follow a policy of non-price competition.

ii] A farmer who produces corn on the Northern-states of Peninsular Malaysia is coming under perfectly competitive market as it is an agricultural product, They will be many farmers in the market and who produces the same product. They cannot charge differentiated price for same product.

c] A perfectly competitive market structure is most prevalent in Malaysian as the Malaysian government is putting control over the market prices of essential items to lower the cost of living.The government is giving more attention agricultural sector according to their new development plans.