According
to the theory of perfect competition, there are no barriers to entry in the market. In this
case, more investors will invest in the computer business because the venture has huge
potential. As a result, computer prices will go down. As the number of sellers increases, the
competition levels go up. Every seller wants to make money, and they cannot do that if they all
sell computers at the same price. Therefore, some firms will reduce prices because they want to
attract price-conscious buyers. In perfect competition, the buyer has good knowledge of the
product and market, and they can go elsewhere if they feel that the price is too high.
Since prices have reduced, the profit margins will also reduce. Computer firms wont
make as much money as before because the market is flooded with other investors in the same
business. As a result, the market share of most firms reduces. Since they cannot increase prices
to maintain the same level of profits, they have to make do with lower...
No comments:
Post a Comment