The essence of competition. The theory of perfect and imperfect competition

Competition means competition between the individual subjects of the market economy for the most favorable terms of production and sales of goods.

The essence of competition is manifested in the following of its features:

• Regulatory - providing products focus on the needs of society, as without it you cannot get income (produce only what will be able to sell, and do not try to sell something that failed to produce);

• Innovation - promoting growth in production efficiency through the use of the achievements of scientific and technical progress;

• allocative (feature location) - the efficient allocation of resources between sectors of production in line with demand and profit margins;

• Sanitize - the elimination of non-competitive enterprises;

• Promotional - lower prices and higher quality.

The following types of competition:

• functional (competition of certain goods);

• competition in price and quality;

• inter-company (among individual firms, industries);

• intra-and inter-branch;

• perfect and imperfect.

The concept of "perfect competition" has a special role in economic theory. The reason is that the studies of perfect competition market explain situations that are not spond to the requirements of that structure. Market is perfect (or as they often say - pure) competition serves a starting point and a benchmark for comparison with other types of market and therefore is estimated to be the ideal market structure ra. This allows you to clearly define the system of constraints faced by each firm in the ways of maximizing profit.

Perfect competition is "perfect" it is in the sense that the organization of the market every firm washes to sell at the market price of products as much as she wants, and the level of prices can not affect any single vendor or single buyer.

Main Characteristics of perfect competition: