The documentary we watched in class described how Minecraft was an example of pure competition. However, there are broader market examples of this theory as well. One long lasting example of pure competition is the Agriculture market, primarily of corn, wheat and soybeans. In order for market to be considered purely competitive it must have a large number of producers supplying a standardized product, easy entry and exit, and have the market prices determined by the consumer.
The Agriculture market is a great example of this because there are firms or individuals producing staple products with set guidelines throughout their production. This allows all of the corn, wheat, and soybeans that are produced to be more or less the same. Also, this market has easy entry and exit because there is a a low barrier for businesses entering the business. Also, firms could stop producing their good anytime, and it would not affect the overall production of the market because there are so many other producers.
In this industry, the suppliers have no influence over the market price because it is determined by the consumer's demands. For example, during the Great Depression, consumer's income was too low to buy standard amounts of corn and wheat products, which led to a surplus in the industry. Firms could not control this because there was so much of the product that if providers lowered the price, the Agricultural market would crash. Prices of corn and wheat are also standardized because there is typically a set price, but that may be increased for consumers by export taxes.
The Agriculture market has been an important part of the country's economy for a long time and will continue to be. This is because it is responsible for staple products that are an essential good for America and exports to other countries so this purely competitive market must continue.
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I think this post is able to clearly explain how pure competition could work in real life. I also like how you discussed historical examples, like the Great Depression, and how they affected pure competition. What I was wondering was if there really is a large number of firms producing corn and soybeans. For example, the company Monsanto controls 93% of the genetically modified soy market and 80% of the genetically modified corn market, according to the Organic Consumers Association. I was wondering if the non genetically modified market was closer to pure competition and how the agriculture industry pre-Monsanto, when it at near pure competition, is different from what it is now.
ReplyDeleteI thought that post did a very good job of explaining the aspects of pure competition in the agriculture industry. It was interesting to learn about the Great Depressions impact on the agriculture industry and how the farmers responded to the economic crisis. This topic is really interesting especially in the midst of the whole trade war between China and the US manipulating the price of corn and soybeans. I think it would be really interesting to learn about how subsidies effect the farming industry and how it could be used to offset the harms of the existing trade war. The concept of entry and exit market and how it engages with the agriculture industry was very interesting. I would not have thought that it has easy entry because of the number of monopolies controlling the industry such as what Anna mentions: Monsanto.
ReplyDeleteThis is a great post detailing the requirements for a purely competitive market and providing a great example of it. The agriculture example reminded me of how the video game market used to be a purely competitive market. From what I have observed companies like Electronic Arts have taken over the market, very similar to how Monsanto took over the genetically modified food market (Anna's comment). I was curious why this trend occurs and if there are any other markets that have began as purely competitive until a major company took control of the market.
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