Bcom 1st Year Distinctions between Perfect and Imperfect Competition
Difference between full and incomplete competition
In practical life only imperfect competition is found, not complete competition and monopoly position. If we look at the conditions of complete and incomplete competition, we find the following differences between the two –
(1) Completed competition is a hypothetical situation, while incomplete competition is a practical and real situation.
(2) In the full competition, the number of buyers and sellers is so high that buyers and sellers are not in a position to affect the price individually. Conversely, buyers and sellers are not in large numbers in imperfect competition, so they have the ability to influence the price.
(3) Full competition is a representative position, while imperfect competition is not a representative position, but there are many situations in it, such as when the economy is very productive and each producer acquires monopoly elements to a limit and simultaneously- It produces such an item which has to face competition in the market (as well as the position of commodity differentiation in the market), then that condition is called multiple competition. When there are only few producers or sellers in the economy, it is called oligopoly. Also, when there are only two sellers of the commodity in the market, it is called duopoly. This was a situation of incomplete competition from the point of view of vendors. Similar situations can occur from the point of view of buyers.
(4) In perfect competition, the object is homogeneous product, whereas in imperfect competition, the condition of product differentiation is found.
Meaning and definitions of the complete competition.
Absolute competition is a market situation in which no buyer or seller is in a position to influence the price of a particular commodity through its buying and selling. Technically, in the event of perfect competition, each buyer faces a fully elastic supply situation and each seller faces a fully elastic demand situation. | In the words of Mrs. Joan Robinson, “Absolute competition is the situation when the demand for production of each producer is perfectly elastic. This means that at first the number of sellers is very high, due to which one vendor produces the goods. There is a very small part of the total production and all other customers are equal in terms of selection among competing vendors. Which makes the market complete. ” Who did this ideology. They told no and not only husband) jointly (Marginal Utility) was considered the main basis of pricing. Prominent economists were Prof. Jevons, Walrus, Menger, Weiser, etc. on this day.
Prof. Marshall tested and coordinated the two ideologies. That the price of the commodity is determined not only by the cost of production (supply side) and by marginal utility (demand side), but both powers (demand and supply) determine the combined price. In the words of Prof. Marshall himself, “Just as in the case of paper we can dispute that the top or bottom of the scissors cuts the pane, similarly in the pricing, it can be said that the price was determined by the production cost from the utility. is.” While the reality is that the type of cutting for which both scissors are necessary, similarly the demand for price (utility) and supply (cost of production) of the commodity is necessary.
The price of any item in the market is determined at the point where the Demand and Supply are equal to each other. This point is called Equilibrium Point and this price is called Equilibrium Price.
Therefore, the equilibrium price is determined by the forces of demand and supply, which represent utility and cost of production respectively.
Demand Force
The commodity is demanded by the buyer class because the object has utility. There is a maximum price limit for each buyer, which is determined by the marginal utility of the item. In other words, the price that a buyer is willing to pay for an item is called the Demand Price.
Demand for goods is governed by the ‘law of demand’, that is, the demand for goods at high prices is low and the demand for goods at low prices is high. The price at which the buyer is ready to purchase a particular quantity of a particular commodity is called the demand price. Each buyer has its own demand list, which shows how much quantity the buyer will buy at different prices. Market demand lists can be created based on individual demand lists.
Supply Force –
There are two important things in relation to the supply of goods, first, why the producer or seller charges the price of the item. Second, the producer or seller would like to charge at least the price of the item. In response to the first statement, we can say that since there is some cost involved in the production of each commodity, the producer takes the price of the commodity. According to the second statement, the producer must take the price of the commodity equal to the marginal cost of the commodity. Thus the lowest limit of price is determined by the marginal cost of the item.
As far as supply is concerned, fulfillment is governed by the ‘law of fulfillment’. In other words, a higher quantity of the commodity at a higher price and a lesser quantity of the commodity at a lower price will be offered for sale. The price at which the seller is willing to sell a certain quantity of goods is called the supply price. Each producer or seller has a supply schedule that specifies how much a seller is willing to sell at different prices. Market Fulfillment Schedules can be created with the help of individual supply schedules.
Price Determination –
According to the general theory of value, “the value of an item is determined by the relative utility of demand and supply between marginal utility and marginal production expenditure at the place where the supply of the commodity is equal to its demand.” This statement implies that from the buyer’s point of view the ultimate limit of price is determined by the marginal utility of the item, while from the seller’s point of view the marginal cost determines the lowest limit of price. Each buyer wants to give a minimum price of the item and the seller wants to get the maximum value of the object, so both the parties (buyer and seller) bargain and finally the price of the item (which Equilibrium or balance point) is determined at the point where the demand of the item is exactly equal to the supply of the object. This point is called Equilibrium Price.
Explanation by example and through Diagram
Determination of demand and supply situation and equilibrium price in the market – The situation of demand and supply in a given time period in a market at different prices is as per the following table.
On drawing the demand and supply curve lines, we see that the demand and supply lines intersect each other at the equilibrium point and this equilibrium point determines the price of ₹ 2 per kg. This is the equilibrium value of the item.