Economics (Part – VII)

Features - In oligopoly, firms are dependent on each other.

• Oligopoly theory is the theory of group behavior.
• The demand curve of an oligopoly is uncertain.
• Entry and exit of firms are difficult.
• 'Throat cut competition' is found.

Pure competition: An industry is said to be in perfect competition when-

• Large number of firms or sellers producing and selling goods.
• The goods produced by all the firms should be exactly the same.
• Free entry and exit of firms in the industry.
• The demand cycle is perfectly elastic.

When the above conditions are combined with the condition of complete knowledge of the market and the movement of the instrument, then the situation of pure competition arises.

The AR curve in the figure is the demand curve, which is perfectly elastic.

Pure monopoly - A firm is said to be operating under a monopoly if it is the sole producer of a commodity that has no close substitutes and does not fear competition of any kind. This is the opposite of pure competition. In this market condition, the firm controls either price or quantity of output to maximize profit.

Pure competition - An industry is said to be in perfect competition when the number of firms or sellers producing and selling a substance is high.

• The goods produced by all the firms should be exactly the same.
• The entry and exit of firms in the industry are free. When the condition of 'complete market knowledge' and 'movement of the instrument' is added to the above conditions, then a situation of pure competition arises.

For the monopolist, its demand curve will be its average revenue curve (AR). The demand curve of the monopolist will be sloping downwards from left to right, as a result the marginal revenue cycle (MR) will lie below the average revenue curve (AR). The marginal revenue cycle being below the average revenue curve means that marginal revenue will be less than price or average revenue for each quantity of output. When the monopolist sells more quantities of the commodity, its price falls, so marginal revenue must be less than the price. Since the equilibrium point is MCMR, MC will also be less than price (AR). Monopolistic Competition: 'Monopolistic Competition' is a near state of perfect competition. It also has all the characteristics of perfect competition, except for one feature in perfect competition all firms produce co-ethnic and identical units of the same commodity. Whereas in monopolistic competition all firms produce different varieties and brands of the same commodity. Despite being differentiated objects, they are closely related to each other. Firms face highly elastic demand curves due to their proximity to perfect competition.

Pure competition - An industry is said to be in perfect competition when the number of firms or sellers producing and selling a substance is high.

• The goods produced by all the firms should be the same.

• The entry and exit of firms in the industry are free.

When the condition of 'complete market knowledge' and 'movement of the instrument' is added to the above conditions, then a situation of pure competition arises.

In the figure, if the price decreases from OP to DP₁ the consumer's savings will increase from RP₁E₁ and if the price increases to OP₂ the consumers' savings will decrease to RP₂E₂.

Disposable Income = Personal Income Direct Personal Tax (Income Tax and Wealth Tax)

OR. Disposable Income = Savings + Consumption Clearly, a reduction in the tax rate will lead to an increase in disposable income, whether consumption increases or not.