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In: Economics

Discuss the main assumptions of perfect competition and monopolistic competition. Discuss the impact of Covid-19 on...

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).

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Expert Solution

Perfect Competition and monopolistic competition are different market structures in an economy. If we consider the basic assumptions of these two market, In Both market forms exist a large number of firms and permit free entry and exit in the markets. The main difference among these markets are perfect competition produce a homogeneous product, perfect mobility of product, and perfect knowledge about market However in the case of the monopolistic market, produce a heterogeneous product, imperfect knowledge about the market, increase the sales by selling cost, and differentiated product. We know the monopolistic market structure is more realistic. Perfect competition is, in reality, is a rare form of market structure.

The impact of the outbreak of COVID 19 creates a sudden negative shock to the global economy. This shock affects mainly in the grocery industry. Because most of thee countries declare the lockdown suddenly so that the first day of lockdown people are buying over the count necessary goods especially groceries this makes shortage and high demand. But declare social distancing importance, people are completely withdrawing from the market. However grocery market demand is not falling, but that markets suffer a lot because they can't meet the high demand due to restriction regardeth the ng the transportation of good by the lockdown. This mainly affects the grown level markets or small supermarkets. Due to these issues numerous small shops, small supermarkets were closed in this period all over the world.

However, hypermarket like Woolworths and Coles they are used personal transportation and E-commerce and home delivery to meet the issues happened newly. They have a lot of fund to invest and their labour force and advanced technology and technicians. So that they change their marketing and functioning. As part of that, they deployed employees to high demanding goods like groceries and invest more fund to that area, they make a new facility to customers to buy product safely by offline or online they stary and expand home delivery and Increase the E-commerce possibilities. Thus They start to maintain their market. Less demanding products case they analyse the issues and take an advanced step like exchange offers, home delivery discounts etc.

If analyse the impact of COVID 19main thing is peoples demand the differentiated product was reduced and they demand homogeneous product more so monopolistic market affect more because they produce the differentiated product. In the case, the small grocery market number of firm exit from the market increase the price level in the market. the monopoly power increase in the global market. In the case of a big market, a number of new firms enter into the virtual market. This creates more virtual monopolistic competition market structure. E .commerce and online monopolistic competitive markets are expanded in COVID situation. In the case of the imperfectly competitive market affected by imperfect knowledge regarding the market condition, lack of demand for the differentiated product,  and inelastic market demand. But the virtual market is expanding with all form of market structure day by day in COVID situation.


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