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SBCA - Perfect Competition - Albuerne, Magallanes - April 5,2021
SBCA - Perfect Competition - Albuerne, Magallanes - April 5,2021
MM-1B
1. What are the characteristics of Perfect Competition based on the Video you watch?
(Name at least 5 characteristics with examples based on the Video)
In Economics, there are only a few industries that can be considered to belong in
perfect competition, since according to various sources there are certain factors that must
be addressed to be qualified. One of the industries that belong to perfect competition, as
shown in the video is the dairy industry, especially milk due to certain characteristics.
The first characteristic to consider to classify it as a perfect competition is when there are
numerous buyers and sellers of certain products. In the video, we can identify that the
main product that is focused on is milk, and we can also identify that there are numerous
sellers which are the grocery stores around the United States, which is also a definition of
perfect competition. On the other hand, it was also mentioned that despite the surge of the
COVID-19 crisis, there are still a bunch of people who buys milk. The second
characteristic of a perfect competition that is reflected in the video was the significant
number of producers of the said product. It was mentioned that in the 20th century, the
producers of milk began to increase, which affected the way on how milk was produced,
sold, and consumed in the industry. It can be manifested in the increase of the number of
farms that also have a huge number of cows that produce milk. Although in recent years
the number of farms decreased by more than half, yet the number of cows per farm
increased by almost triple that of the recent years. In the video, the CEO of the National
Milk Producers Federation, or NMPF, mentioned how the producers of the milk were
affected in the current situation. The organization itself manifests that there are plenty of
producers of milk in the United States, which is a characteristic of perfect competition.
The third characteristic of perfect competition is the availability of information that is
shared with both buyers and sellers to come up with a relevant decision. One of the
relevant pieces of information that was shared in the video was the way how milk was
sold at a particular time. In the 1950s, according to the video, the milk that was sold was
mostly were delivered to their homes. A couple of years later, in 1997, milk was bought
in the supermarket where it is placed inside a jug. It also increased as there are several
uses of milk, especially when breakfast cereal was also dominating the market. These are
a few of the information that is shared to have perfect competition since it can help the
sellers and buyers in rationalizing their decisions. It can also help the producers to have
unity in terms of how they price the product since it gives a huge impact to have perfect
competition. The fourth characteristic of perfect competition is somehow connected to
the second characteristic, which is the homogeneity of the product. Since there is an
association that oversees the move of the producer of the milk, the result of the product
will somehow be homogenous in the market. Perfect competition at its core is all about
having a fair share in the market, wherein all the products that have been sold have no
effect on the competition in the market. The main focus of the video reflects on this
particular characteristic, the dumping of milk from the farmers since they could not sell
their products during the pandemic. We could see the homogeneity of the product in this
particular scenario since the farms that are involved in the production are affected which
means with one product that is all affected. Another situation that we could consider the
homogeneity of the product was reflected when there was a high price of supply, wherein
all the farmers boost their production to take advantage of the surging demand. Last but
not least in the characteristic of perfect competition is the freedom of a producer can
transport their goods from one place to the other. The situation in the video which reflects
the said characteristic was the time when European Union loosens the restriction of
domestic milk product that led to the exportation of milk. The European producers took
advantage of it, and exported their products to the continents with high demand, like Asia
and Africa. To sum up, perfect competition in the video represents different
characteristics which result in the homogeneity of the market, which results in lesser
competition since they do not have the variety of price that the customer can ponder and
compare.
2. How much actual competition occurs in perfectly competitive markets? Some make the
claim that there is actually no competition between firms in a perfectly competitive
market. Do you agree or disagree with this claim? What is your reasoning?