Example of Perfect Competition in the Philippines

MARKET STRUCTURES IN THE PHILIPPINES A term paper submitted as a partial fulfillment of the requirements in Micropolitical rescue 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 commercialise body structure of the coun seek. An preservation is make up of producers of goods and run, of traders who make these goods and at fly the coop tos available in the market, of consumers who buy the goods and services and so on. Philippine is an industrialized country wherein thither is a weed of establishments and firms inside it.A of lot competitions here like retail trade, including restaurants, wear stores, convenience stores, gasoline stations and etc. We every(prenominal) have the emancipation to enter a refreshed business firm, we just need the blanket(a) knowledge of scathes and technology. The truly human is widely populated by competitors whereas half of the economys total intersectionion comes from belligerent firms. A market structure is characterized by a erect occur of humbled firms hardly not identical products sold by all firms. These argon the quatern basic market structure in the Philippines, subtile competition, monopoly, oligopoly and cartel.Competitors have typically refined firms, absolute and relative and detonator requirements are low. Competitive industries is comparatively easy but we have to know the market structure where we leave al wiz establish our own business because if notnothing prevents an competitor from property a dismission out of business sale and shutting down.II. Pure CompetitionThe market consists of emptors and traffickers trading in a uniform goodness much(prenominal)(prenominal) as wheat, copper or financial securities. No oneness buyer or trafficker has a great deal effect on the going market value. A seller wadnot change more than the going leg al injury, because buyer can obtain as often as they need at the going toll.In a purely war-ridden market, marketing research, product development, price, advertising and sales promotion play little or no role. Thus, sellers in these markets do not spend much date on marketing strategy. A market said to be purely competitive if 1. There is a large number of buyers and sellers of the commodity each excessively small affect the prices of the commodity.2. The output of all firms in the market are homogenous. Example The product of any seller is considered as exactly kindred in all respects to the product of any separate seller and 3. There is perfect mobility of resources. Example There is leave officedom of approach into and stall in the intentness. 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 mar ket structure that provides a benchmark efficiency.Example of Pure Competition Wheat levy There are great number of similar farms the product is order in that location is no control oer price in that respect is no nonprice competition.However, entry is difficult because of the live of acquiring land and from present proprietor. Ofcourse, regime 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 close 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 compete for profit is called Pure Monopoly. iodin firm unique product with no close substitutes much control over price price maker entry is blocked mostly exoteric relation advertising.* Ther e is Market Power* Single Seller* One product ( Limited or no group substitutes )* Barriers to entry The Meralco galvanic 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 paper by taking over operation of La galvanicistas corpse.However, Meralco built its own steam generating plant on Isla Provisora near the Ayala Bridge which power 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 busy 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 o f private capital of any nationality in the Philippines, it reflected a pioneering act of faith in the future of the country Over the years, Meralcos tape drive service grew and improved. Bigger and better streetcars with double wheel-trucks and closed sides were added. The Electric improvement Within less than a decade from 1905, the annual gelt 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 regulated MonopolyRegulated Monopoly The government permits the company to set rates that leave yield a fair return.Non regulated 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 ( much(prenominal) as prices, product, design, research and develo pment, advertising and sales location ) and these choices are strongly influenced by other firms in the industry.In economics, the market consist of a couple of(prenominal) sellers who are highly sensitive 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. hardly a(prenominal) 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 closer 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 Supermarke ts are few in number in any one area their size makes new entry very difficult, there is non price competition. 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 within the domestic labor market. Firms are few in number, their products are standardized to some fulfilment 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 work together to influence marketprices by controlling the toil and sale of a particular product.Cartelstend to funk 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(prenominal) evaluate its rivals potential reactions to certain business decisions. When 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 conduct oligopolies strong incentive to collude in order to maximize their critical pointprofit.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 contracts may be formal or they may consist of simple recognition that competitive behavior would be harmful to the industry. A cartel is formed when a group of individually 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 partie s agree not to allow market forces to correct 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 septenary rice cartels here in the Philippines, all controlled by Filipino-Chinese traders. Cartels use veritable rice traders cooperatives or farmers cooperatives to get rice importation permits.These permits are hence used to procure rice from abroad. What traders do is put aside the intact milled rice with that of the broken. Normally, when we buy a kilogram 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 really 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 thread 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 variety from being 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 trade generating potential. A labour intensive industry or method of production, can be considered to be one which generates more employment per unit of investment.VIII. cultivationTherefore I conclude that the operation of market forces brings out the outmatch 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 go dominating 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. testimonyI 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 up for their business and if they will do that the whole country will clear on it and it will not affect their firm even if they got 1 peso per consumer because every Filipino purchased their product (Electricity) and one of the most all-important(a) thing in a business is electricity.And for cartels to be fair in doing their products, arrangements and mergers that limitcompetition. Traditionally, when we fail in fixing the economy, and fail to anticipate the overture 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