Example of Perfect Competition in the Philippines

MARKET STRUCTURES IN THE PHILIPPINES A term paper submitted as a partial fulfilment of the requirements in Microeconomics Submitted by Jake Kevin P Borja BSBM IIB Submitted to Ms. Azelle Agdon Date of submision October 10, 2012I. Introduction Any study of economics has to begin with an understanding of the basic grocery structure of the coarse. An economy is do up of producers of unslopeds and services, of traders who make these goods and services available in the market, of consumers who buy the goods and services and so on. Philippine is an industrialized state wherein on that point is a lot of throwments and firms inner(a) it.A of lot ch all toldengers here like retail trade, including restaurants, clothing stores, convenience stores, gasoline stations and and so forth We all chip in the freedom to enter a bran-new stage business firm, we just need the ample knowledge of wrongs and technology. The real world is widely populated by competitors whereas half of the economys amount performance comes from war-ridden firms. A market structure is characterized by a large add of wasted firms but not identical products sold by all firms. These argon the four basic market structure in the Philippines, thin competition, monopoly, oligopoly and cartel.Competitors have typically subatomic firms, absolute and relative and metropolis requirements argon low. Competitive industries is comparatively easy but we have to know the market structure where we depart establish our own business because if notnothing prevents an competitor from holding a dismission out of business sale and shutting imbibe.II. sodding(a) CompetitionThe market consists of buyers and traffickers trading in a uniform trade good such as wheat, copper or financial securities. No single buyer or seller has practically effect on the going market charge. A seller cannot change more than the going p sieve, because buyer can obtain as much(prenominal) as they need at the going price.In a purely competitive market, market research, product development, pricing, advertising and sales promotion play comminuted or no role. Thus, sellers in these markets do not spend much time on marketing strategy. A market said to be purely competitive if 1. thither is a large number of buyers and sellers of the commodity all(prenominal) too small affect the prices of the commodity.2. The output of all firms in the market are homogenous. Example The product of both seller is considered as exactly alike in all respect to the product of any separate seller and 3. There is perfect mobility of resources. Example There is freedom of innovation into and exit in the industry. Perfect competition To the far left of the market structure continuum is perfect competition, characterized by a large number of relatively small competitors, each with no market control. Perfect competition is an idealized market structure that provides a benchmark efficiency.Example of Pure Competitio n Wheat Farm There are great number of similar farms the product is standardized there is no control all over price there is no nonprice competition.However, entry is difficult because of the represent of acquiring land and from present proprietor. Ofcourse, governance programs to assist agriculture complicate the purity of this example.III. MonopolyA market with a sole supplier of good and services or resources for which there is no occlude subtitute. In addition, there is barriers to entry of new firms. In economics, an industry with a single firm that produce a product, for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to make do for profit is called Pure Monopoly.One firm unique product with no close substitutes much control over price price maker entry is blocked mostly public relation advertising.* There is Market military force* Single Seller* One product ( Limited or no group substi tutes )* Barriers to entry The Meralco voltaic Company is a perfect example of Monopoly in the Philippines. The only supplier of electricity in our country Birth of Meralco in 1903. Meralco started its electric service to Manila by taking over operation of La Electricistas strategy.However, Meralco built its own steam generating plant on Isla Provisora near the Ayala Bridge which powered the streetcar system and eventually also the electric service. Getting Started, 1903-1905 On April 10, 1905, Meralcos street railway system was formally inaugurated. By year-end, the completed system consisted of about 40 miles (63 km.) of track crossing the business section of Manila and beyond. It passed the concern streets of Binondo, Escolta, San Nicolas, Tondo, Caloocan, Malabon, Quiapo, Sampaloc, Santa Mesa, San Miguel, and other strategic parts of Manila.Constituting for a long time the largest single investment of private corking of any nationality in the Philippines, it reflected a pi m avinering act of faith in the future of the country Over the years, Meralcos conveying service grew and improved. Bigger and better streetcars with double wheel-trucks and closed sides were added. The Electric Service Within less than a decade from 1905, the annual earnings of Meralcos Electric Department began to surpass those of Transportation. When war broke out in 1941, Meralcos earnings were roughly 80% electric, 10% autobuses and 10% railway.There are two types of MonopolyRegulated MonopolyNon set MonopolyRegulated Monopoly The government permits the company to set rates that will yield a fair return.Non adjust Monopoly Company is free to price at what market will bearIV. OligopolyOne characterized by small number of firms where quantity sold by any one firm is influenced by its choice in respect of strategic variables ( such as prices, product, design, research and development, advertising and sales location ) and these choices are potently influenced by other firms i n the industry.In economics, the market consist of few sellers who are highly mass medium to each others pricing and marketing strategies. There are few sellers because it is difficult for new seller to enter the market. Each seller is alert to competitors strategies and move. Few firms standardized or differentiated products some control over price in a narrow range relatively easy entry much nonprice competition advertising trademarks brand names. In the middle of the market structure, residing walking(prenominal) to monopoly, is oligopoly, characterized by a small number of relatively large competitors.Each with substantial market control. A substantial number of real world markets fits the characteristics of oligopoly.* Small number of firms* Product differentiation may or may not exist* Barriers to entryExamples 1. Hometown Supermarkets Supermarkets are few in number in any one area their sizing makes new entry very(prenominal) difficult, there is non price compet ition. However, there is much price competition as they compete for market share and there seems to be no collusion. In this regard, the supermarket acts more like a monopolistic competitor.This may vary by area. 2. Steel Industry indoors the domestic production market. Firms are few in number, their products are standardized to some extent their size makes new entry very difficult there is much nonprice competition there is little if any, price competition while there may be no collusion, there does seem to be much price leadership.V. CartelAcartelis a group of companies, countries or other entities that agree to prune together to influence marketprices by controlling the production and sale of a particular product.Cartels run for to spring from oligopolistic industries, where a few companies or countries generate the entire supply of a product. This small production base means that each producer must evaluate its rivals potential reactions to certain business decisions. Whe n oligopolies compete on price, for example, they tend to drive the products price throughout the entire industry down to the cost of production, thereby lowering profits for all producers in theoligopoly. These circumstances give oligopolies strong incentive to collude in order to maximize their jointprofit.Members of a cartel generally agree to avoid various competitive practices, especially price reductions. Members also often agree on production quotas to keep supply levels down and prices up. These agreements may be formal or they may consist of simple recognition that competitive sort would be harmful to the industry. A cartel is formed when a group of independently owned businesses agrees not to compete with each other in areas such as prices, territories, and production.A cartel agreement is considered a collusive agreement in that the different parties agree not to allow market forces to determine their pricing, production, and other business practices. Rather, the members of the cartel agree on such matters as what price to charge, how much to produce, and which markets to serve. * Rice in the Philippines is cartelized. There are seven rice cartels here in the Philippines, all controlled by Filipino-Chinese traders. Cartels use let rice traders cooperatives or farmers cooperatives to get rice importation permits.These permits are then used to procure rice from abroad. What traders do is put aside the unscathed milled rice with that of the broken. Normally, when we buy a kilo of rice. A kilo of rice differs in prices depending on the composition of whole and broken rice. Normally, its 70-30, meaning 70% whole grains with 30% broken ones. The percentage of broken rice decreases if the trader wants to increase price. So price truly depends on how small or how little the percentage of broken rice you have in a kilo. If you buy a kilo of whole grain, that is higher than that of all broken rice.VI . SummaryWe have seen that there are four basic market structure in the Philippines. Producers are led by the profit motive to produce those goods and services which the consumers want. They try to do this at the minimum possible cost in order to maximize their profits. Moreover, there is a competition among a number of producers, they will each try to keep the price of their product low in order to attract the consumers. The goods produced are made available in the market by traders. They also act in their own self interest. VII. analysisThe Philippines economy is the worlds 43rd largest in the world as of 2012. The Philippines has undergone a transformation from creation an agricultural based country to a industrialized country. The economy is now vastly dependent on the services and manufacturing sector. The country has a total labor force of around 38. 1 million. Labour and capital intensive industries can be distinguished in terms of their employment generating potential. A labour intensive industry or method of production, can b e considered to be one which generates more employment per building block of investment.VIII. ConclusionTherefore I conclude that the operation of market forces brings out the best results when there is Pure Competition in the economy. Pure competition is a situation where there are a very large number of firms producing the same product, and size of no firms is so large that can exercise peremptory influence over market. Under these conditions, the competition between the firms is such that they tend to manufacture their products at a very competitive price and a high level of efficiency and productivity prevails in the market.IX. testimonialI therefore recommend that the monopoly company in the Philippines to lessen their price cost for the consumer because as we all know that they are only supplier of the electricity in the country. All of the people over the country pay for their business and if they will do that the whole country will benefit on it and it will not affect the ir firm even if they got 1 peso per consumer because every Filipino purchased their product (Electricity) and one of the most important thing in a business is electricity.And for cartels to be fair in doing their products, arrangements and mergers that make up ones mindcompetition. Traditionally, when we fail in fixing the economy, and fail to anticipate the rise of this basic staple, sure enough, expect a potential crisis in the streets. And if we do not balance the competition between one another there will be no effect in the growth of the economy of our country. X. References http//www. scribd. com/ http//www. britannica. com. ph/ http//www. investinganswers. com/ http//www. enotes. com/ http//www. newphilrevolution. com/ Economics for managers