真二第張四第二日八十月二年笺辛屬复 WAH KIU YAT PO
1971 英文中學會考試題預習專欄
新光出版社主編 SUNLIGHT
PRESS
經濟及公共事務科 (二十)
Economic and Pup11C Affa:
Lesson 20
14th March, 1971.
Answers to Exercise. 19.
1. Describe the major characteristics
perfect competition.
How is the price in perfectly compet= itive industries determined basing upon the supply and demand functions
Answer when market structure 18 ment¬ ioned, we always refer to the two main thus derived --- perfect comp-
Ngạnd imperfect competition, To
bring out briefly and essentially the difference between the two, we can say that while perfect competition characterises perfect knowledge of market conditions, maximum competition between employers, as well as between workers, and complete mobility of all factors of production; imperfect competition assumes domination of the market by the sellers either in the form of monopoly, or oligopoly, or monopolistic competition to a certain extent.
•Perfect competition provides the customers with the most rational choice because the part played either by in- dividual buyer or seller is negigible. This is achieved when the numbers of buyers and sellers are sufficiently. large. Furthermore, personal control. over market supply or market demand is impossible because in a perfectly compe etitive market, information with regard to price and-quality of a commodity can reach buyers and sellers instantanes ously.
To ensure that trade can carry an in the fairest way without being influenced by individual buyers or sellers over price, homogeneity of the product is "must". It gives the buyers no pre- ferences for dealing with partí
ular seller because the existence advertisements or sales. promotion is rather fruitless when the buy regard the products identical.
pu state that the demand of the product of any firm under perfect competition is highly elastic as to its measurement, any firm needs to allow for only a very small change in the price it can get for its product as a result of any change in its own supply. In this case, it enables the factors of pro- duction to move freely from the decl- ining industries to the expanding industries. Consequently, productions under perfect competition are usually mostly desirable to the customers.
Perfect competition can best eflect the Laws of Supply and Demanu in the following ways in
At first, the market price of a commodity under perfect competition is determined exclusively by demande That is to say, we assumed that supply ie fixed under this condition. This can be illustrated graphically in Figure 1.
PRICE
Po
0.
as QUANTITY
(Figure 1)
original demand
supply
an increase în demand a decrease in demand
Whenever more, or a commodity is wanted, the price of that product is raised (P1). On the other hand when demand of the commodity. declines, the price. will consequently drop (P2). This will surely act as a hint for producers, or sellers to produce more or less of the commodity according to the be haviours of the consumers.
報日僑莘
When a longer time is experienced, the situation will be represented graphicalty in Figure II.
PRICE
50
Qo
QUANTITY
(Figure II)
we can assume that supply of the
commodity is freely variable. Under this assumption, perfect competition
BLLOWS
the sellers to come into or to leave the market freely. If the demand of that product increases, larger quantity of that good will be produced in the market (Q1). the demand of that product decreases, it will only be natural for producers
produce less of the
In case
a result of the de-
clining demand, the quantity supplied will drop (02).
As buyers and sellers can adjust
themselves actively in the market, we, can be sure that under perfect compet-
ition there are no unsold
or unfulfilled shortages.
again
can be shown in Figure III as a whole.
•PRICE
མ
♡..
Qu Qo Q,
QUANTITY
(Figure III)
An increase in demand will raise the price (P1) and increase the quantity bought and sold, (01). A decrease in demand will lower the price (12) and decrease the quantity bought and sold (Q2).
We can draw our conclusion there- fore, that the market price under w perfect competition is automatically- adjusted. It depends entirely on the market supply and demand of the whole economic society. And in this case, we found that the firm's marginal revenue equalled its price.
S
A
What are the various forms of imperfect competition 7
Describe their basic characteristics,
Answer :- Under imperiect competition, we
have three main classifications, viz. monopoly, oligopoly and monopolistic competition, each possessing its ind- ividual features.
At.
In the strict sense of the term, nopoly refer duct in a "given".
to the only seller
particular
The phenomenon seldom
when ordinary definitions 。ists
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Under oligopoly, we take into
consideration an industry in whic there are a few large firms with a relatively homogeneous product, for
example, plastic, copper, or truck tires, etc. Under this circumstance,
a firm belierous ny change ing
its price may
its competitors
a reduction in price in order to attract more customers is likely to be followed by rivals. As careful consideration of the response of the rivale must be under taken before any change in price can take place, oligopoly implies a strong tendency towards price stability.
With monopolistic competition should involve industries where firms stand at a sufficiently large number, Competit- ion among firms in an industry is vig- orous. The line separating perfect from monopolistic competition is: the products sold in perfect competition must be identical (homogeneous) while that in monopolistic competition products offered for sale are different-, iated. Usually, brand preferences for a product in monopolistic competit- fon
are important, as in the case of cigarettes. Instead of devoting its full energies to reducing costs, a firm may concentrate at strengthenin the public's preferences for its brand-
we can end up our topic with summary of the industries classified
erect Competition
Oligopoly:
Monopolistic Competition.
Monopoly
Demand
of
ELASTICIty of demand decream: es from the left to the right,
highly elastic
rather inelastic.
procurt
is adopted --- of toothbrushesjo electrical appliances, flights by air, haircuts, and the like. But when
Wa narrow the sense of product inst- ead of flights by air, we only take sight-seeing tours over Hong Kong, instead of toothbrushes, we only consider for electric-toothbrushes an the number of sellers of any product would be smaller than the former case, So, under monopoly, we can see only one firm is allowed to produce a particular product or supply a part- icular service within a particular area in order to satisfy the consumers. Their privileges over other sellers are usually granted by the government so concerned. It is true that a singi
...
seller of a certain product in a given market has far more power
than any
one seller has when hundreds exist in competition. But instead, he must take into consideration the competition from sellers of different but related products and those which can sometimes be used as a substitute.
fairly le88
elastic
elastic
Pricing - The freedom of changing.
the price of a product in- creases from the left to the right. On the right-hand extremity, monopoly provides the maximum free-will over. pricing.
Competition :- Competition among firms
in an industry decreases from the left to the right. On the left-hand extremity, perfect competition is subjec- fod to a keen competition.
rcise zu
are the main branches of Froduction ?
Trace the stages in the Ilow of
commodity from the producer to the final consumer.
what is meant by division (specialis- ation) of labour ?
What are the main advantages and disadvantages of it ?