In: Economics
Introduction
A perfect competition takes place, "when there are numerous
buyers and sellers in the market place, and the buyers and sellers
both are fully aware and well informed of each other’s decision
making. There is no possibility of asymmetric information to be
there and the competition is at its peak. The entry and exit of
sellers are also free, meaning that there is no restriction on
trade and anyone who wants to enter the market is free to do so.
Similarly, in these market types, the customer becomes the king as
a result of increased innovation and competition. Also, one buyer
or seller is unable to influence the prices or profits for business
by his own unilaterally"
Accordingly, the following are the key concepts of the case study
which have been explained in detail: -.
Case Specifics: -
1) One of the most interesting points about perfect competition is the fact that as a buyer we have full information about the goods and services being provided and its quality and other aspects have fully been understood by us. In normal conditions, this would not be likely however, it has increasingly happened over the last few years, wherein consumer awareness on a global level has increased to the point, that they remain curious even before a product or a service is introduced in the market place.
The concept of Market research and analytics is a new one, however each consumer today uses it as a tool before a major purchase decision. He has access to multiple sources of information through which he makes an informed purchase decision which is based on evidence, reviews and other similar conditions. This disallows one company to be the solo king in the industry and the constant competition increases the likelihood of innovation and price wars both of which are good for the end consumer.
2)
One of the major issues which the society at large has faced is the rise of big corporations which have always controlled the markets in a way and manner which they have wanted to. However, with the existence of such concepts, the competition in the industries has risen and the consumer has rightly become the king of the market, as fulfilling his demand has become of prime importance.
Globally, we identified, that before the existence of such concepts both firms as well as consumers were left unaware of what quantities they should purchase or sell a product. The concepts of perfect competition gave firms the ability to produce at a level wherein they could extract maximum revenue by deciding to continuously innovate their products and keeping prices at a level which were expected by the consumer. and the consumer on the other hand since had developed to have sufficient knowledge about products was able to survive better in these market types.
3)
The increased reason as to why business innovations take place so rapidly and companies such as Apple. Google. Microsoft etc compete with one another so fiercely is that competition is at its peak and customers are well informed about the same. The need to innovate therefore is constant and that is the only way in which we can satisfy our customers and stay in business even when profit margins may remain the same over the years respectively.
4)
Reaching the peak of competition is vital for any society. This helps us in understanding various institutions which have been set up by the government towards controlling existence of single producer markets wherein they exercise full control over the market place and are also known as monopolies. Laws such as the Anti-Trust Law in the United States is a prime example of how governments step foot to control the existence and rise of monopolies.
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