Question

consider the differences between competition in a purely competitive industry with no dynamism and competition in an industry with technological Advance and in novation in the long run. What are the differences explain with dynamic adjustments

Answer 1

Ans: Pure Competition-

Pure Competition is a market situation where there is a large number of independent sellers offering identical products. It means it is a term for an industry where competition is stagnant and relatively non- competitive. Companies within the pure competition category have little control of price or distribution of products .

Pure competition involves:

• Very large number
• Standardized product
• Price Takers
• Free entry and exits

Perfect Competition-

Perfect competition is a form of market in which there are a large number of buyers and sellers competing with eachother in the purchase and sale of goods, respectively and no individual buyer or seller has anu influence over the price .Thus perfect competition is an ideal form of market structure in which there is the greatest degree of competition.A perfectly competitive market is one in which economic forces operate unimpeded .

Perfect Competition involves:

• Both buyers and sellers are price takers.
• The number of firm is large.
• There are no barrires to entry.
• The firm's products are identically.
• There is a complete information.
• Firms are profit maximizers.

The main difference between Pure competition and Perfect competition is that in pure competition there is no monopoly enabling a producer to charge more.If the two conditions of pure competition are fulfilled ,there can be no question of monopolistic control. In perfect competition ,apart from the absence of monopoly ,some other conditions are also essential,e.g. free entry and exit, the absence of transport cost, perfect knowledge.