Social Sciences and Humanity Studies Academic Blog

Perfectly Competitive and Monopolistic Market

Posted in assignment, perfect competitive by Shekhar on June 7, 2012

Dominick Salvotore (1992, p 203) characterize a perfectly competitive market with four features as given below

i)                    There are great number of seller and buyers of the commodity such that the actions or decisions of the single buyers or sellers don’t affect the price of the commodity. To say more, the change in the output of a single firm will not perceptibly affect the market price of the commodity (p.213)

ii)                  The product of all the firms in the market are homogenous, identical and perfectly standardized. As a result the buyer can’t distinguish between the output of one firm and that of another and there are no preferences to the output of any specific firms. The environment is another determining factors in which purchase is made to characterize a monopolistic market (p. 213).

iii)                There is perfect mobility of the resources. That means worker and inputs in the production process can easily move from one job to another can catch up the possible monetary incentives at such decisions. In long run, firms can enter or leave the industry without much difficulty without worrying much about trademarks and patents or copy rights provisions (p. 213).


iv)                Consumers, resource owners and firms in the market have perfect knowledge of present and future prices and costs. For example consumer won’t pay higher prices than necessary to the commodity (p. 214).

Dominick Salvotore (1992, p 241) outlines four features of a monopolistic market as given below

i)                    There is a single firm selling th commodity

ii)                  There are no substitutes for the commodity

iii)                Entry to the industry is very difficult or impossible

iv)                Monopolist has perfect knowledge of present and future prices and costs