2. ADVANTAGES OF
PERFECT COMPETITION
Optimal allocation of resources:
Economic efficiency
Maximization & effectiveness of utility and
service.
COMPETITION ENCOURAGE EFFICIENCY:
Tight competition between buyers
Buyers get efficient as they embrace
change in the competitive market.
3. CONTD…….
CUSTOMERS BENEFIT:
LOW PRICE OF PRODUCTS OR SERVICE
PERFECT ENVIRONMENT FOR CONSUMER
CUSTOMERS NEED CHANGE
THE RESPONSE IS DRIVEN BY CUSTOMERS WISH.
4. DISADVANTAGES OF PERFECT
COMPETITION
LESS PROFITS:
COST OF PARTICIPATING THE
COMPETITION
PROFIT VS INVESTMENT.
DIVERSITY OF PRODUCTS
WIDTH AND DEPTH OF THE BRANDS
AND PRODUCTS
COST INVOLVED IN DEVELOPING
AND LAUNCHING NEW PRODUCT OR
SERVICE.
5. CONTD….
LIMITATIONS OF PRESENTATION:
PRODUCT DESIGNS
PRODUCT SPECIFICATIONS
INEQUALITY:
UNEQUAL DISTRIBUTION OF
GOODS(FOR EX HARD DISK)
UNEQUAL DISTRIBUTION OF
INCOME(EG GLITTER
TOOTHPASTE).
6. IS PERFECT COMPETITION
REALISTIC?
ASSUMPTIONS MARKET MUST
SATISFY TO BE PERFECTLY
COMPETITIVE ARE RATHER
RESTRICTIVE.
IN VAST MAJORITY OF MARKETS
ONE OR MORE ASSUMPTION OF
PERFECT COMPETITION WILL,IN A
STRICT SENSE, BE VIOLATED
YET WHEN ECONOMISTS LOOK AT
REAL-WORLD MARKETS THEY USE
PERFECT COMPETITION MORE
OFTEN THAN ANY OTHER
7. IS PERFECT COMPETITION
REALISTIC….
WHY IS THIS?
MODEL OF PERFECT COMPETITION IS
POWERFUL
MANY MARKETS-WHILE NOT STRICTLY
COMPETITIVE-COME REASONABLY
CLOSE.
WE CAN EVEN-WITH SOME CAUTION-
USE MODEL TO ANALYZE MARKETS THAT
VIOLATE ALL THREE ASSUMPTIONS.
PERFECT COMPETITIONS CAN
APPROXIMATE CONDITITIONS AND YIELD
ACCURATE ENOGH PREDICTIONS IN A
WIDE VARIETY OF MARKETS.
