Perfect competition presentation

GROUP MEMBERS

Vu Hoang Son

Le Phuong Nhi

Truong Phuong Quyen

Nguyen Minh Tan

Bui The Tan

Nguyen Khac Vinh

PERFECT

COMPETITION

WHAT IS PERFECT COMPETITION ?

A large number of small firms

A homogeneous product

Very easy entry into or exist from the

market

Perfect competition is also referred to

as pure competition

FEATURES OF PERFECT COMPETITION

There are large number of buyers and sellers

No buyer or seller can influence the ruling

marker price by their own actions

All buyers and sellers possess perfect

market information

All units of commodity are homogeneous

Firms are free to enter and leave the market

at any time

A PERFECTLY COMPETITIVE MARKET

A perfectly competitive market must

meet the following requirements

Both buyers and seller are price takers

The number of firm is large

There are no barriers to entry

The firm’s products are identical

BOTH BUYERS AND SELLERS ARE PRICE TAKER

Price taker is a seller that has no control

over the price of the product it sells

In most markets, households are price

takers they accept the price offered in

stores

The retailer is not perfectly competitive

A retail store is not a price taker but a

price maker

THE NUMBER OF FIRM IS LARGE

Large means that what one firm does has no

bearing on what other firms do

Anyone firm’s output is minuscule when

compared with the total market

THERE ARE NO BARRIERS TO ENTRY

Barriers to entry are social, political or

economic impediments that prevent

other firms from entering the market

Barriers sometimes take the form of

patents granted to produce a certain

good

Technology may prevent some firms

from entering the market

THE FIRM’S PRODUCTS ARE IDENTICAL

This requirement means that each firm’s

output is indistinguishable from any

competitor’s product

WHY RICE IS A PRODUCT OF PERFECT

COMPETITIVE MARKET ?

There are large number of small firms

WHY RICE IS A PRODUCT OF PERFECT

COMPETITIVE MARKET ?

All firms produce a standardized or

homogeneous product

WHY RICE IS A PRODUCT OF PERFECT

COMPETITIVE MARKET ?

Easy entry

PERFECT COMPETITIVE IN WORLD MARKET

When trade barriers are neglieable

the price of domestic goods is

influenced by the world market price

The prices of rice in Vietnam fell in 1999

the supply of rice in the world

increased significantly

PERFECT COMPETITIVE IN WORLD MARKET

The price of a commodity traded on the

world market will depend on its price in

other countries

” The Law of One Price”

THE LAW OF ONE PRICE

The theory that the price of a given security,

commodity or asset will have the same price

when exchange rates are taken into

consideration

WHY DO WE NEED TO KEEP RICE PRICES

STABLE AND AFFORDABLE ?

High concentration of exports coming from

only a few countries

The international rice market is vulnerable to

disruptions in supply from major exporting

countries, leading to higher world price

In the international rice trade, a relatively

small number of exporting countries must be

interact with a large number of importing

countries

WHAT CAUSES FOR RICE PRICE TO RISE?

Supply going short

+ the decreasing trend in growth yield is due to

insufficient public investment in agricultural

research

+ contributed to poverty reduction directly

through increased income for rice farmers

+ indirectly through lower prices of rice due to

the steady supply brought about and the

overall increase in global rice production

WHAT CAUSES FOR RICE PRICE TO RISE?

Demand increases

+ Economic growth in large countries

such as India and China has increased

the demand for cereals livestock

consumption

+ Africa has been importing rice

accounting to one third of the total world

trade