Production And Perfect Competition - Megamergers and Oligopoly - Coursework Example

Production and Perfect Competition Characteristics Milk Market: An Example of a Perfectly Competitive Market A marketplace refers to a locality where the exchange and trading in services and goods occur. The buyers and sellers converge in such locality to trade on their commodities. Depending on the nature of the market, the products traded, the number of traders, trade restrictions, the degree of information symmetry, and any trade barrier, market gets its definition. According OaShaughnessy (2005), a market is defined as “a group of buyers and sellers in sufficiently close contact with one another, that exchange takes place among them".

From economic point of view, a market is characterized by the existence of a commodity to be traded, buyers and sellers, and the willingness to exchange. The common market structure is either perfect or imperfect competition.Agricultural products are traded in a perfectly competitive market structure. For example, milk producers supply processed and non-processed milk products to the market for the consumers. The milk market is characterized by large of number of sellers and buyers who are involved in this exchange.

In addition, the market is unregulated by the government hence a free-market with no government intervention. Owing to the large numbers of milk traders, the effect of a single seller/buyer may go unnoticed as each trader’s contribution is insignificant (Siegfried, & United States, 2010). Both the seller and buyer are price-takers in the market as the exchange price for milk products is determined by the market forces of demand and supply; therefore, each trader has limited influence on effective market prices (OaShaughnessy, 2005).

The milk products traded in the market are homogeneous and undifferentiated. However, the sellers and manufacturers attempt to create a difference in the products through branding and packaging. Being a perfect competitive market, there are no barriers to exit or entry into this market. The buyers and sellers would leave or enter the market at will. Under this market, the milk products are similar in shape, size, quantity, and quality, hence, infinite cross elasticity of demand for milk products (OaShaughnessy, 2005).

The buyers are therefore indifferent to all the milk brands and products in the market. Being a perfectly competitive market, milk market is characterized by perfect information symmetry. All the participants in the market have perfect information on all the prevailing market conditions, thus, no seller could benefit by charging abnormal prices for milk. Finally, the single unit price of the milk market is not affected by transport cost as the transport cost under this market is zero (Siegfried, & United States, 2010).

However, this may not be the case in many markets as some of the sellers may incur transport charges in bringing the products to the market. ReferencesOaShaughnessy, J. (2005). Competitive Marketing: A Strategic Approach. Routledge.Siegfried, J. J., & United States. (2010). The Economics of firm size, market structure, and social performance: Proceedings of a conference. Washington, D.C.?: The Bureau.