Advantages And Disadvantages Of Perfect Competition

743 Words2 Pages

In a perfectly competitive market, the goods are perfect substitutes. There are a large number of buyers and sellers, and each seller has a relatively small market share. Perfect competition has no barriers to information regarding prices and goods, meaning there is no risk-taking behaviour – sellers and buyers are rational. There is also a lack of barriers for entry and exit.
Perfect competition is likely to exist in the supply of sugar cane stalks to mills. There are a large number of farmers (the seller) and buyers. Information about competitors’ prices are easily accessible and the sugar cane stalks supplied are perfect substitutes.
In agricultural markets, farmers sell homogenous products. There are a large number of sellers and buyers, since crops are essential foodstuffs. Farmers and buyers are …show more content…

The goods and services provided by each seller are differentiated by cuisine, skill, ingredients used and more. Each seller sets their prices according to their production costs with little regard for other competitors. There is high access to information, such as prices, menus and reviews, but limited by the fact that the value can only be determined after the experience. An oligopolistic market has a small number of sellers dominating market share and therefore barriers to entry are high. These sellers are highly competitive and do not act independently of each other. Access to information is limited so sellers can only speculate of their competitor’s actions. Sellers will take advantage of competitor’s price changes in order to increase market share.
An oligopoly is likely to occur in the sugar refinery, to which raw sugar is transported from sugar mills overseas. Sugar refineries are also expensive to operate due to machinery and transport costs so barriers to entry are high. It is likely there are a small number of firms operating sugar refineries scattered across the

Open Document