Advantages (Benefits/Arguments) for Perfect competition Market structure
- It increases the level of output. This is because of a large number of firms involved in production due to freedom of entry of firms in the industry. This leads to a reduction in prices in the long run.
- Efficiency in resource allocation. Since there is a number of firms producing for a limited market, competition forces them to be very efficient in order to out compete other firms and remain in the production process, hence the provision of better quality goods and services.
- No wastage of resources, Since the market structure assumes perfect knowledge about the market conditions e.g. knowledge about market prices, the type and quality of commodities sold etc. there is no wastage of resources through advertisement by the sellers.
- High standards of living for the consumers. In the long run high standards of living are enjoyed by consumers because of increased production of high quality goods and services which are bought at low prices.
- It provides an efficient standard measure for comparison of prices in other markets.
- It promotes equitable distribution of income. This is due to freedom of entry of firms in the production process
- Optimal utilization of resources in the long run. Resources are fully utilized and efficiently allocated. This is because the inefficient firms are pushed out of production whereas the efficient firms keep on operating using the available scarce resources in the most optimal way.
- It ensures fair and stable prices. Prices under perfect competition tend to be stable because all firms charge uniform price. This promotes economic stability hence economic growth and development.
- Creation of employment opportunities. Because of competition among so many firms, investments are promoted in the economy which increases employment opportunities.
- Absence of consumer exploitation. This is because all firms charge the same price and no single firm has the ability to restrict output and charge a high price so as to exploit consumers as the case is for monopoly.
CATEGORIES General
TAGS Dr. Bbosa Science
