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How does perfect competition and monopolistic competition differ and effect our buying power.
Perfect competition is a market structure where many firms offer a homogeneous product.
Because there is freedom of entry and exit and perfect information, firms will make normal profits and prices will be kept low by competitive pressures. If supernormal profits are made new firms will be attracted into the industry causing prices to fall.
Due to the fact that there is flexibility of entry and exit and perfect information, companies will make regular revenues and prices will be kept low by competitive pressures.
Perfect competition describes a market structure where competition is at its biggest possible level.
Thus, in the short period, the number of companies remains constant as nobody can be available in and nobody can go out.
However in the long period, the firms can reoccur, i.e. In it the optimal output which a specific firm can produce is reasonably really little to the overall demand of the market’s product so that it cannot affect the price by varying its supply of output.
No individual firm can determine the market price, or market conditions.
Perfect competition a market structure defined by a big number of firms so small relative to the total size of the market, such that no single company can affect the market cost or amount exchanged.
Customers have many alternatives if the excellent or service they want to buy ends up being too pricey or its quality starts to fall short.
Brand-new firms can quickly get in the market, creating added competition.