Saturday, August 10, 2019

Production And Perfect Competition - Megamergers and Oligopoly Coursework

Production And Perfect Competition - Megamergers and Oligopoly - Coursework Example The common market structure is either perfect or imperfect competition. Agricultural products are traded in a perfectly competitive market structure. For example, milk producers supply processed and non-processed milk products to the market for the consumers. The milk market is characterized by large of number of sellers and buyers who are involved in this exchange. In addition, the market is unregulated by the government hence a free-market with no government intervention. Owing to the large numbers of milk traders, the effect of a single seller/buyer may go unnoticed as each trader’s contribution is insignificant (Siegfried, & United States, 2010). Both the seller and buyer are price-takers in the market as the exchange price for milk products is determined by the market forces of demand and supply; therefore, each trader has limited influence on effective market prices (OaShaughnessy, 2005). The milk products traded in the market are homogeneous and undifferentiated. However, the sellers and manufacturers attempt to create a difference in the products through branding and packaging. Being a perfect competitive market, there are no barriers to exit or entry into this market. The buyers and sellers would leave or enter the market at will. Under this market, the milk products are similar in shape, size, quantity, and quality, hence, infinite cross elasticity of demand for milk products (OaShaughnessy, 2005). The buyers are therefore indifferent to all the milk brands and products in the market. Being a perfectly competitive market, milk market is characterized by perfect information symmetry. All the participants in the market have perfect information on all the prevailing market conditions, thus, no seller could benefit by charging abnormal prices for milk. Finally, the single unit price of the milk market is not affected by

No comments:

Post a Comment