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A perfect competition is the simplest market structure and is relevantly uncommon because of the number of factors that are involved, which are. Multiple participants, identical products, information and the free market. More often than not at least one of the factors is absent, or modified, in market structures due to either Government Intervention or specialization.
A large number of buyers and sellers: In perfect competition, the buyers and sellers are large enough, that no individual can influence the price and the output of the industry. An individual customer cannot influence the price of the product, as it is too small in relation to the whole market. Similarity, a single seller cannot influence the levels of output, who is too small in relation to the gamut of sellers operating in the market.
Homogenous Product: Each competing firm offers the homogenous products, such that no individual prefers a particular seller to the other. An increase in the price would let the customer go to some other supplier.
Free Entry and Exit: Under the perfect competition, the firms are free to enter or exit the industry. This implies, if a firm suffers from a huge loss due to the intense competition in the industry, then it is free to leave that industry and begin its business operations if any of the industry, it wants. Thus, there are no restrictions on the mobility of sellers.
Perfect Knowledge of Prices and Technology: This implies that both the buyers and sellers have complete knowledge of the market conditions such as the prices of products and the latest technology being used to produce it.
No Transportation Cost: there is an absence of transportation cost; this is an essential condition of the perfect competition since the homogenous product should have the same price across the market and if the transportation cost is added to it, then the prices may differ.
No Artificial restrictions: under the perfect competition, both the buyers and sellers are free to buy and sell the goods and services. This means any customer can buy from any seller and any seller can sell to a buyer. No restriction is imposed on either party. In addition, the prices are liable to change freely as per the demand-supply conditions. No big producer and the government can intervene and control the demand, supply or price of the goods and services.
Imperfect Competition: an industry in which single firms have some control over price and competition. Imperfectly competitive industries give rise to an inefficient allocation of resources.
Monopoly: an industry composed of only one firm that produces a product for which significant barriers exist to prevent new firms from entering the industry.
Features: a Large number of firms in the industry. May have some elements of control over price due to the fact that they are able to differentiate their products in some way from their rivals- products are therefore close, but not perfect, substitutes.
Entry and exit from the industry are relatively easy- few barriers to entry and exit. Consumer and producer knowledge imperfect.
Most suppliers have a degree of control over market supply. Some buyers have monopsony power against suppliers because they purchase a significant percentage of total demand.
Most markets have heterogeneous products due to product differentiation and constant innovation
Consumers nearly always have imperfect information and the effects of persuasive marketing and advertising can influence their preferences and choices. Finally, there may be imperfect competition in related markets such as the market such as the market for essential raw materials, labour, and capital goods
Nike is an example of monopolistic competition because they have the aspects that a perfect competition has, except their products are not exactly like their competitors such as Adidas and Under Armour.
Monopolistic is a characteristic form of an imperfect competition. An imperfect competition exists when there are many sellers of a good or services but the products do not contain noticeable differences. There are several forms of the imperfect competition of which monopolistic competition is one. Nike has sponsors like Kobe Bryant who endorse and wears the products
Demand: the power to purchase a good along with a willingness to purchase it. If a consumer holds one of them, demand does not exist. The quantity of a good that potential purchasers would buy or attempt to buy, at a certain price.
Affordability: The degree to which the product is affordable to customers, in terms of acquisition and deployment operation and support, and disposal costs.
If there is a minor decrease in Nike’s prices, the demand for its goods may rise as consumers move from competitors. The prices of the products of competitors such as Adidas have an immediate effect on their demand. When the prices of its products are high, the demand for Nike products will increase as consumers move to Nike. As Nike and Adidas are global sports businesses, therefore both will be trying to top the other in sales and revenue.
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