The Case:
The processed food industry in Pakistan has made significant progress in recent years. The industry is now focusing not only on traditional processed food items (e.g., cereal, biscuits, jam, pickles, juices, spices, etc.) but also on value added products, such as frozen ready-to-cook/fully cooked food, healthier snacks, dressing and sauces, processed meat and poultry. A large number of firms have come up in the market to cater the rapid changing needs of the customers. Despite of huge competition, this industry has huge potential to generate profits due to high demand of the customers.
Requirement:
Being a student of economics, analyze the topics of market structures carefully and identify the market structure category in which processed food industry fall. Justify your answer by applying the characteristics of that market structure on the given industry.
Answers
Processed food falls in monopolistic competition.
Characteristics.
1) Monopolistic competition is also characterized by a large nu of buyers and sellers.
2) There is no entry barriers.
3) In these two respects it is like perfect competition.
4) Firms are price takers.
5) Products are differentiated.
6) A firm making profits in the short run will break even in the long run because demand will decrease and average total cost will increase.
7) In the long run, a monopolistic competition firm will make zero economic profit.
8) Due to the brand loyalty, this gives the company a certain amount of influence over the market.
9) It can raise its prices without losing all of its customers.
10) Individual firm's demand curve is downward slopig.
11) in the short run, super normal profits are possible but in the long run only normal profits can be earned.
12) since the products are differentiated, there is a room and rationale for advertising and product promotion.
ʙᴇ ʏᴏᴜʀs..............^_^
Types of market structure:
Perfect competition
Monopolistic competition
Oligopoly or Cartel
Monopoly
Perfect competition characteristics:
Perfect competitions are biscuits, jam, juices.
Perfect competitions are unrestricted freedom of entry.
Perfect competitions are many numbers of firms.
Perfect competitions are homogenous nature of product.
Demand curve of firm Implication horizontal way. That way, Firm is a price taker.
Monopolistic competition:
Monopolistic competition are healthy food, saucer.
Monopolistic competition has unrestricted freedom of entry.
Monopolistic competition is several/many number of firms.
Monopolistic competition is differential nature of product.
Curve move downward sloping but relatively elastic that way, firm has some control over prices.
Oligopoly or Cartel:
Oligopoly or Cartel is cereal, pickles.
Oligopoly or Cartel has restricted freedom of entry.
Oligopoly or Cartel is little number of firms.
Oligopoly or Cartel is Undifferentiated / Differentiated nature of product.
Curve move downward sloping relatively inelastic
That’s way, price changing due to reaction of case.
Monopoly:
Monopoly consists as Meat & Poultry.
Monopoly is restricted & blocked freedom of entry.
Monopoly is one number of firms.
Monopoly is unique nature of product.
Curved move downward sloping more inelastic
So, Firm has over price control.
ʙᴇ sᴍᴀʀᴛ................^_^