MY OPINION REGARDING MARKET STRUCTURES IN INDIA..
COMPETITION EVERYWHERE!
Monopolistic Competition
Monopolistic competition is defined as a market
structure where there are a large number of producers. One eligible example is Indian Movies.
Movies are obviously differentiated products. In
a year, a total of almost 800 movies are produced by 380 producers which in mostly in small companies. This shows that there are absolutely
a large number of producers. This gives firms opportunity to easily enter and
exit the industry. However, because of the large market, producers are unable to
rely on the price of their product. This is why producers tend to advertise
their products.
Firms however have very little control over the
price of their products. The market is so huge that if a firm increases the
product’s price, consumers can easily buy similar products for cheaper price. In
these kind of market structures, firms are recognized as price makers.
This
is evidence that the entertainment industry in India have Monopolistic
competition structure.
VS
Perfect Competition
Perfect competition can be defined
as an industry in which there are a huge number of sellers. One
suitable example is vegetable and fruit vendors in India.
This is proven, as there are many vegetable or fruit vendors
in India. Thus, competition is very intense. They do not require a lot of
capital to open the business. Henceforth, makes it easier for a producer to
enter the industry. Barriers to enter the industry do not exist. Unfortunately,
vendors who had been in the industry for a longer time of period will not have
any influence towards vendors who are just starting their sales.
This is a market structure where firms have no market power.
Considering, vegetables and fruits sold with one of the vendor is no different
than the ones sold with another vendor, the products are undifferentiated.
Hence, producers don’t have any influence on the price and would have to accept
the equilibrium market price.
This
acts as prove that Perfect competition exist in India.
OPINION
The table below indicates the comparison between the
market structures.
Monopolistic Competition
|
Perfect Competition
|
Large number of
producers
|
Large number of
producers
|
Little control
over price
|
Little control
over price
|
Easy entry and
exit
|
Easy entry and
exit
|
Differentiated
products
|
Undifferentiated
products
|
In my opinion, the only difference between
Monopolistic competition and Perfect competition market is that, in
Monopolistic competition, the products sold are differentiated. Whereas,
Perfect competition, sells undifferentiated products.
I can prove this by appointing that there are many
genre or types of Bollywood movies. Each type of movie is defined to be suitable
for only some type of people. Example, romantic movies are for emotional
people. Other than that, horror movies are best suitable for people who enjoy
thriller.
We can see the difference between the differentiated
movies and undifferentiated vegetables and fruits. There is no difference
between vegetables and fruits. Example, spinach is sold at a certain stall.
Even if the consumer were to buy spinach at another stall, they would be
absolutely no difference regarding the vegetable.
This shows that the difference between Monopolistic
competition and Perfect competition is the differentiation of the product.
{Please click on picture to enlarge}
You can see the following article for further reference:
Written by
Shasha Hannah 0315621
Such as great and clear market structures’ explanation! Especially the table used to differentiate monopolistic competition with perfect competition. I definitely understand what are exactly monopolistic competition and also perfect competition after reading this post. But I actually wanted to know, what is the effect that these market structures gave to the Indian? Is it considerably useful for other countries in the economy growth?
ReplyDeleteHello, Sherryn Cheok.
DeleteFirstly, I’m glad that this post helped you in gaining knowledge! I shall cross my fingers that my explanation below could be the answer that you searching for.
Firms in monopolistic competition provide variety of choices of particular product. Therefore, it gives the consumer various type of options so that they can make choices based on their demand. This also give effect to the firms that they have the freedom to enter the market to do business and exit easily when they do not gain profit. The pricing strategy in perfect competition of India cause the sellers cannot set their price at a high price but equal to the prices of market equilibrium otherwise consumers will probably switch to another stall or store to buy that particular product. However, this situation makes things easy for the consumers in India that they do not need to make choices on where to buy the cheaper product while it is the same prices in all stalls and stores. The firms in others more advanced country such as Australia or Canada does not use this market structure because they want to gain a proximately profit to contribute in the business. This can lead to less competition as they have limited number of firms selling identical product. It can also save cost as the product do not turn into wastage that cause from other perfect substitutes of the product in others firms.