The paper “ Competition in the Australian Market for Groceries” is affecting example of the assignment on macro & microeconomics. To establish if the Australian retail grocery market is a perfectly competitive one, it is imperative that we examine two scenarios. The first scenario would be to examine the concept of perfect competition and then secondly assess the Australian retail grocery market. From here, the paper draws comparison to establish if or if not the Australian retail grocery market is perfectly competitive. Klein (2007, p. 2) notes that the perfect market condition is demarcated by a scenario where there are numerous buyers and sellers and that their decisions do not impact on the market price.
This, therefore, implies that businesses that operate under perfect competition are price takers and not price makers. Jain & Khanna (2010, p. 3) corroborate the above view by noting that in perfect competition, there are lots of buyers and sellers of homogenous goods. In this regard, the price of the commodity traded in the market is not at the disposal of sellers to determine, but it is within the discretion of the larger industry.
Therefore, under the perfectly competitive market, “ at the price so determined, all the firms can sell any number of units of the commodity. ” The other hallmark characteristic under perfect competition is that “ one price of the commodity tends to prevail in the market’ ” . Therefore, this is why firms operating in this context are said to be price takers and not price makers. To indulge in this deeply, Jain & Khanna (2010, p. 3 & 4) observe that the following characteristics feature prominently. The first is that there several buyers and sellers, but if compared to the larger market they are small in size and thus sellers can’ t influence prices by changing quantity and on the other hand, buyers can’ t change the price by changing demand.
Others include the fact that products traded are homogenous in nature; customers have perfect knowledge and hence are aware of prices; barrier for entry is low and thus there is free entry and exit of firms; free from check since buyers of sellers can’ t collude to fix prices; perfect mobility; lack of transport cost; lack of selling cost and existence of the same price.
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