econ discussion post

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Alexander Shellhaas posted Feb 26, 2018 9:51 PM

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            Perfect competition is a type of market that features a large number of sellers, an identical product and extremely easy access to and from a market. One of the economic aspects of this is that it has a perfectly elastic demand curve. The supply and demand of that particular market forces each dealer to accept the equilibrium price. If the price is raised above that, the dealer could end up selling absolutely nothing. If the price is lowered, then the revenue would be lowered unnecessarily when the product could be sold at a higher price  (Tucker, 2017).

            One of the closest examples of a market in perfect competition would be a farmer’s market. All the vendors would be selling the same items like produce and eggs. There would be no shortage of people who are willing to deal these products. Finally, there would be very few, if any, roadblocks to get into or to leave the market. All that is needed for produce is a small plot of land in a backyard. In order to vacate the market, the seller would just simply not arrive the following week but could come back at any time. No real-world market actually fits the term of perfect competition literally (Tucker, 2017).

            The monopoly is a market structure that is the absolute opposite of perfect competition. The monopoly features a single seller who has a resource that no one else possesses and where the entry into the market is totally impenetrable. The reasons why it is so difficult to get into a market include a business would need ownership of an essential product, the government only licensing that firm to supply the product to its inhabitants and the fact they can produce the resource more cheaply in the long run compared to having multiple firms produce it. This is called economies of scale (Tucker, 2017).

            A good example of a monopoly would be public utilities. Water, electric and gas are given a unique franchise by governments to operate in their jurisdiction and it enables those people to be able to utilize the services at a very efficient rate. The government then makes sure that price oppression does not occur by supervising these utilities.  This is very important because monopolies have perfectly inelastic demand curves which means that the demand remains the same regardless of the price charged. The monopoly is able to set its own price for its service due to the lack of any competition(Tucker, 2017).