Here we will introduce the concept of perfect competition, an ideal model that serves as a benchmark against which real-world market structures are analyzed. Also known as the model of pure competition, perfect competition results in an efficient allocation of resources.
In the real world, however, unregulated markets (which are central to perfect competition) may fail to create desired outcomes for a number of reasons. Economists refer to these situations as examples of imperfect competition.
You will first study the Model of Perfect Competition and then move on to what may be considered the antithesis of perfect competition, the Monopoly Model.
Upon successful completion, you will be able to:
- identify the characteristic differences between various market structures, namely, perfectly competitive markets and non-competitive markets, and discuss differences in their operations; and
- compare and contrast as well as discuss kinds of economic systems.