By:

Dr. Eti Khatri

 What is the primary aim/goal of businesses?
 To maximize profits
 What is competition?
 Striving against others to reach an objective
 1. Pure/Perfect Competition
 Large number of buyers and sellers
 Identical product
 Well informed buyers and sellers

More Competition Less Competition

Many buyer/sellers +

Identical Products
 Large no of sellers and buyers
 Homogeneous products
 Perfect mobility of factors of production
 Free entry and exit of firms
 Perfect knowledge
 Absence of collusion(seller union, customer
association)
 No government intervention
  Meets all condition of perfect competition except for
identical products.
 Product differentiation
 Monopolistic competitors use nonprice competition
 Advertising, giveaways, or other promotions

More Competition Less Competition

 Pepe Levi’s Wrangler
Same as pure competition except for product differentiation
Are these shampoos/conditioners different?
Dove L’oreal
 Are these mascaras different?
Maybelline Lakme
Rs. 325 Rs. 400
 A few very large sellers dominate the
industry
 Oligopolists act independently by
lowering prices soon after the first seller
announces the cut
 Collusion: formally agree to set prices
 Engage in price wars

More Competition Less Competition

Ipod Zune
Few producers control supply and price
 Coca-Cola classic  Fanta
 Sprite  Fresca
 Dasani  Minute Maid
 Barq's  Mr. Pibb
 Dannon  Powerade
 Nestea  Seagrams Ginger Ale &
 Rockstar Mixers
 Evian  TAB
 Aquafina  MUG Root Beer
 Pepsi  Slice
 Mountain Dew  Gatorade
 Sierra Mist  Dole Juice
 Sobe  Tropicana
 Lipton Brisk Tea
 Toyota
 Scion
 Lexus
 Chrysler
 Jeep
 Dodge
 Chevrolet
 Buick
 Pontiac
 GMC
 Saturn
 Hummer
 SAAB
 Cadillac
 Onlyone seller of a particular product
 Few monopolies
  One seller dominates the market with no
close substitutes

More Competition Less Competition