This is my post for this week's discussion in microeconomics, basically asking for examples of perfect competition and market failures:
An example of perfect competition around me? Well, recently my girlfriend and I had been browsing materials for sewing, since she is intending to make her own wedding dress. At Joann's the price for a particular type of ribbon was 80 cents for a roll of it, and a Wal-Mart it was 40 cents, but the amount of yardage on Wal-Mart's product was also half that of Joann's so it amounted to the same price density. However, there is a lot of differentiation among ribbon types, so this doesn't meet that criteria and is not in a perfectly competitive market. I'm having difficulty thinking of items which meet all the criteria, but I keep coming up with exceptions. Gasoline is fairly close to being so, at least within individual local markets.
For an imperfect market, Wal-Mart will always come to mind since they stank when I worked for them and I haven't gotten over how absurd they are yet, but just to be different: Half Price Books. In my local market area, they have the majority of the business in used books. Their prices are not so bad, when you are buying from them, but if you are selling to them, they are more than willing to pay you $2 for a collection of books that are worth over $200. With their share of the buying and selling of used books market, they can offer whatever price they care to.
For a public good. Well, air is a public good. Anyone trying to enter the market to sell air to people on the land (or otherwise not going scuba diving) would be in a sad situation. However, as illustrated in the movie Total Recall, if air for general breathing were not a public good, then it would be a very expensive item with extremely high demand.
For externalities, sales tax comes to mind. It is something which is at a cost to the purchaser, it detriments purchasing slightly with the realization that a price tag usually does not include sales tax so it is not the exact cost, and it benefits the government by providing income for every in-state purchase.
For imperfect information, I consider rental leases which have the basically formulated clause of "we reserve the right to alter this contract however we like and once you sign your name you agree in advance to any alteration we make" to contain imperfect information in essence. What you read at the time you sign, essentially means nothing. They alter the terms according to their whim reserve the ability to throw you away if you disagree, even though you are the one paying for their income and providing their companies' revenue.
02 Dec 2009, 6:30 pm
