British Car Market Essay Example | Topics and Well Written Essays - 1250 words

British Car Market - Essay exampleThe undefiled competition is mere terminology that is used to describe a situation which can be easily comprehended by new learners in Economics. In the real world there is no trade that can be classified as being a undefiled market. The main appraisal behind the perfect market is the term perfect competition. Perfect competition refers to the case where all aspect of competition is known thus giving all information to the market. In a perfect competition, an individual firm is called a price-taker this is because the market forces decide upon the equilibrium price and quantity. The point that everything is known delegacy that regardless of how much a firm produces it volition get the same price throughout its register as demand is constant and no one can raise the price or tied(p) lower it as the elasticity is ZERO in this case and the addition of each unit in the sidetrack brings bout the same change as the previous one. This could be we ll reflected by the understanding of the borderline Revenue principle. In the perfect market, demand tends to stay at the same level throughout the register so any increment to the cost will that add up to the loss. The main mark of a perfect market is to produce at the lowest cost possible because price is the only factor which is considered important.In a perfect market, there are a large number of buyers and sellers. This core that the market concentration ratio is very low for each firm which adds to the fact that there would be no effect upon the market if a firm collapses or enters into competition. The addition would only add to the general output and nothing else and the addition would be of quite a low grain. Product homogeneousness Homogeneity of production is another factor that hinders the classification of the car market as being perfect. In a perfect competition, the products are homogenous that is they exhaust the same attributes as of their substitutes or c ompetitor products. This means that it will not make a difference that which item you buy and from where you buy as long as it matches your description. Since the products are homogenous in the market than quality issues can be raised whereas in a car market one is paying a worthy amount so it is important to have a distinction on what he buys. Cars are also classified as Status Symbols, charge this in mind we come to the point that distinction is necessary and thus homogeneity in this market is not acceptable.Entry and ExitMoving ahead we have the case for entry and exit. In a perfect market, every one is free to enter and exit at will. This means that costs are not an issue in this type of problem as free entry and exit means that the costs are low for firms and they can easily switch production among commodities. Further a perfect competition is dominated by small firms this is why the HHI (Herfindahl index) is low for these firms. Imagine that a car producer can switch product ion easily. SILLY isnt it Yes it is. The machinery required to manufacture a car is very unlike from that which makes Balloons. In this case if the demand for cars falls so can the producer shift to the Balloon fabrication in a momentary run Never, it is difficult to shutdown large