Free «Perfectly competitive market model» Essay Sample

The market that seems to be competitive in my area is that one of petroleum products. The place has several companies that sell the products to the consumers. All these companies virtually face competition from others. The various petrol stations owners are the sellers while the buyers include the vehicle owners, industries, homesteads and others.  As a perfectly competitive market, this market has seems to be characterized by the following characteristics. The market does not have entry and exit barriers as the new companies can enter the market and they can leave the market without any restriction.

The products in this market are homogeneous making the buyers to buy from any seller and receive the same petroleum product and the sellers of these products seem to possess a very perfect knowledge about the cost, prices and quality of the products. In this market, a single buyer or seller is not allowed to influence the market price of the petroleum products.

The petroleum product sellers in this market are forced to take the prices that exists at a particular time because if one seller sets his prices above the market price, the buyers will simply buy the products from other buyers in the market. If on the other hand the seller sets his prices to be low, he will sell much but reduce his profits.

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Since the sellers are forced to take the prices that exist in this perfectly competitive market, they are referred to as the price takers. This market's sellers do not compete through prices. Instead, the competition is determined by supply, demand and the government. For instance, the government can set the prices of these products in accordance with the existing laws and regulations.

Competitive environment

Competitive environment is the one that is characterized by the competitors and the changes in customers that influences the strategy of the market. This may include the introduction of new products in the market by the competitors, the rise of new customer values and new distribution channels.

   

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