Example of Perfect Competition Sample Essay

Example of Perfect Competition Sample Essay The perfect competition is a market where many small firms produce the same products and do not have the ability to control prices for it. The number of buyers in such a market is also infinitely large. None of the market participants has more information than all the rest. This is a theoretical model, in real life, there are only a few of such markets where such conditions could be fully implemented. But some markets are close to perfect competition. These are the agricultural product markets (for example, the wheat market, the corn market), the fish market and the stock market where securities are sold. Why do individual producers operating in the markets of perfect competition fail to affect the market price? In the market, an equilibrium price has been established where there are infinitely many buyers and sellers selling exactly the same goods. For example, one of the sellers decides to sell the product at a higher price. Obviously, he will not sell his goods as there are still many sellers selling exactly the same goods at a lower price. As a result, the income of such a seller will only decrease. In case another seller decides to sell the goods cheaper. Of course, he will sell them. However, since there are many customers, he would sell his goods in any case, and if the price is too low, each unit of goods that was sold cannot bring him the right income. As a result, the proceeds of the second seller will also be less. Only at an equilibrium stock market price, the proceeds of sellers will be greatest. In the market of perfect competition, the seller is forced to accept a market price, he is a price-taker. In the short term, it is convenient to carry out the analysis of the industry and competition from the point of view of the model of perfect competition. It is assumed that many sellers sell a large number of standard products to a variety of consumers. Experts who study the industry of perfect competition, take into account that any decision taken by the firm to increase or decrease the price level will not affect the market prices in general. In addition, the analysis of the industry and its perfect competition implies the absence of non-price competition. In microeconomics, the industry with a model of perfect competition is the standard for maximising profit and assessing the effectiveness of the economy as a whole. The stock market is developing and growing that points out the efficiency of the perfect competition for developing the economy of any country. Acting on the stock market, where the level of competition in various industries largely depends on the countrys legislation, the firm faces a large number of competitors that somehow influence its activities and profit. Therefore, in the process of strategic and tactical planning, it is extremely important to conduct a comprehensive analysis of competition, which involves the research on the work of competing companies and the competitiveness of goods on sale.