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In today’s class, we will be talking about the imperfect market. Enjoy the class!
What is imperfect competition?
Imperfect competition is one in which the market structure shows some but not all the features of a competitive or perfect market. It is a form of a market situation whereby some of the important rules of a perfect market are not followed. It the direct opposite of a perfect market. In other words, an imperfect market refers to any market situation that does not meet the so-called rigorous standards of a hypothetical perfectly competitive market. An imperfect market arises whenever individual buyers and sellers can influence prices and production, or otherwise when perfect information is not known to all market actors.
In the real world, most markets follow this model of competition. This is because practically, imperfection is inevitable. It is important to note that in imperfect competition, the price of goods can increase above their marginal cost and thus have consumers decrease their level of purchase.
Imperfect competition can also be defined as a situation where many sellers are selling heterogeneous goods as opposed to the perfect competitive market scenario. Imperfect competition in real-world competition. Today some of the industries and sellers follow it to earn surplus profits. In this market scenario, the seller enjoys the luxury of influencing the price to earn more profits. If a seller is selling a non-identical good in the market, then he can raise the prices and earn profits. High profits attract other sellers to enter the market and sellers, who are incurring losses, can very easily exit the market.
Types of imperfect market
- Oligopoly: A situation in which there are few sellers of a product.
- Monopolistic competition: A situation in which many sellers are producing highly differentiated products.
- Monopoly: Where there are many buyers but only one seller.
- Monopsony: Where there are many sellers but one buyer.
- Oligopsony: Where there are many sellers but few buyers.
Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets. Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers’ willingness to pay and in the elasticity of their demand.
In our next class, we will be talking about Industries in Nigeria. We hope you enjoyed the class.
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