Question

Discuss about the Price strategy of the company in context of imperfect competition. Competitive Microeconomic strategies of large enterprises in the context of the “new ec

Answer 1

Ans)

Price strategy imperfect competition

Imperfect competition emerges in situations where there is neither pure competition nor pure monopoly. The situation of imperfect competition is the real world that lies between these two extremes. Imperfect competition may be in several forms.We can not define imperfect competition in a single case there are various situations representing imperfect competition. Here, we shall understand the Price Determination under Imperfect Competition.

Monopoly

There is only one firm prevailing in a particular industry called A Monopoly Market Structure. When a single firm controls 25% or more of a particular market is known as monopoly power from a regulatory view. Indian Railway is an example.

1 Lack of Substitutes

In monopoly structure firms normally produce a good without close substitutes. The product is generally often specific and unique.

2 Barriers to Entry

There are significant barriers exists to entry set up by the monopolist. If new firms want to enter the industry, the monopolist will not have complete control of a firm on the supply.

3 Competition

In a monopoly market structure, there are no close competitors in the market for that product.

4. Price Maker

The term Price Determination under Imperfect Competition symbolizes monopoly market. The monopolistic sets the price of the product. Since it has market power, This power makes the monopolist a price maker.

5 Profits

A monopolist can maintain supernormal profits in the long run but it not necessary that he earns profits too. He can be making a loss or maximizing revenues. This can never happen under perfect competition.

Monopolistic Competition

Monopolistic competition is a market structure which has elements of both monopoly and competitive markets.

Features

1There are many firms.

2 Freedom of entry and exit.

3 Firms manufacture differentiated goods.

4 Firms have price inelastic demand, therefore, they are price makers because the good is highly differentiated.

5 They earn normal profits in the long run but could make supernormal profits in the short term.

6 Dynamic efficiency is possible as firms have excess profit to invest in research and development.

7 In a monopolistic competitive industry, this is possible the firm does face competitive pressures to cut cost and provide better products

In a monopoly, the firm may use its monopolistic powers to realize high revenue, Hence, he is not a price-taker but a price maker. Therefore, option b is the correct option since it is not a characteristic of a monopoly.

Microeconomic Issues

Microeconomics studies individual prices, quantities and markets, on the other hand macroeconomics studies the behaviour of the economy as a whole. It examines the forces that affect firms, consumers and workers in the aggregate.

direct - a positive relationship expressing that the growth of one variable is accompanied by the growth of the other variable (e.g., the price and the offered quantity = the supply function),

indirect - a negative relationship expressing that the growth of one variable is accompanied by the simultaneous decline of the other variable (e.g., the price and the demanded quantity = the demand function)

,neutral - mutual independence of variables, this means that the growth of one variable does not cause a change in the other variable.

Microeconomics studies the economy at wide level the form which produces as at large scale or trade internationally are included in microeconomics there are many factors affecting the microeconomics at aggregate level of large companies or MNC

Profit maximization

High revenues

Less import duty

High demand of the good in the international market

Innovative ideas

High export

All these factors are included in the enlargement of any company which is trading at international level it is responsible for the growth and expansion of that company.

Thank u