Main market. Majority of people know about the

Main conditions for perfect competition:

1. Very similar products;

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2. Unlimited number of sellers and buyers of
one type of product;

3. No monopoly;

4. The prices of the products are made by the
market, but not by the government;

5. Similar opportunities for all people to
start own business from economical point of view;

6. Accessible information in everywhere about
prices on the market. Majority of people know about the prices of products;

7. Mobile factors of production, it is easy
to open a company or close it if it is unprofitable;

8. Competitors, in general, do not effect on other
market players.

 

By the way, there are 5 main points, which can be taken
from that list:

1. Many sellers and buyers

2. Uniformity of goods

3. Lack of control over the price

4. Free access to the market

5. General availability of information

 

Let’s consider each of these points in details:

1. The market is full of small sellers and
buyers. This fact creates a situation for some products that they have so small
price that it is almost equal to the cost price, and companies simply survive;

2. There are homogeneous products on the
market. Therefore, when buyer is choosing a seller, he or she looks only on
price of goods, but only if sellers provide the products with the same quality;

3. Because of the fact that market is
overcrowded and only one type of product is present on it, neither sellers nor
consumers can influence on the cost of production;

 

4. There are no barriers for opening the
company by average citizen. It is free access to buy materials, register
company, rent some place and start work;

5. Most people know the approximate or exact
price for a particular product. Since all buyers know the prices of products on
the market, they will choose the better offers, which are based on price;

 

 

Advantages of the system:

• Strong market, due to the large number of
players on it;

• High level solutions of problems for
buyers. Higher competition = higher level of service and product quality;

• Entrepreneurs can independently choose the
type of activity. Government does not limit them in it;

• Low and stable market price of goods. Large
market players crowd out the small companies from the market making lower
prices for products. Big players have fewer production costs, correspondingly
lower prices. Buyers are winners.

 

Disadvantages of the concept:

• This market model provides equal
opportunities for all firms, but the result depends only on themselves. Success
depends not only on satisfying the wishes of the consumer, but also on the
competent distribution of finance at the beginning;

• The desire to increase income often leads
to worsening the environmental situation and the exhaustion of natural
resources;

• A large chance of crowding out small companies
from the market because of the low production costs which are put by large
players.

 

Examples of perfect competition:

1.       Food industry: potato, kebabs, canned
products;

2.       Online stores: electronics, zoo
goods, cosmetics;

3.       Printing companies, advertising
agencies, small logistics firms.

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