Economics Supply And Demand Questions Medium
A monopoly and a perfectly competitive market are two extreme forms of market structures that differ in terms of the number of firms operating in the market, the level of competition, and the control over prices.
In a monopoly, there is only one firm that dominates the entire market and has exclusive control over the supply of a particular product or service. This means that there are no close substitutes available for consumers to choose from. As a result, the monopolist has significant market power and can set prices at a level that maximizes its own profits. The monopolist faces a downward-sloping demand curve, meaning that it can increase prices without losing all of its customers.
On the other hand, a perfectly competitive market is characterized by a large number of small firms that are all price takers. This means that each firm has no control over the market price and must accept the prevailing price determined by the forces of supply and demand. In a perfectly competitive market, there are many buyers and sellers, and the products offered by different firms are homogeneous or identical. This ensures that consumers have a wide range of substitutes to choose from, and no individual firm has the ability to influence the market price. Each firm faces a horizontal or perfectly elastic demand curve, meaning that it can only sell its products at the prevailing market price.
In summary, the main difference between a monopoly and a perfectly competitive market lies in the number of firms operating in the market, the level of competition, and the control over prices. A monopoly has a single firm with significant market power and control over prices, while a perfectly competitive market has many small firms that are price takers and have no control over prices.