Imperfect competition occurs when firms can influence market prices, unlike in perfect competition where firms are price-takers. It is characterized by a few dominant firms and includes market structures such as monopoly, oligopoly, and monopolistic competition. Understanding imperfect competition is crucial for grasping the dynamics of modern industrial economies.

1. IMPERFECT COMPETITION

2. Imperfect Competition
▪ In a perfectly competitive market, firms are price-takers
▪ It is an ideal situation and such a market situation is hard to
find
▪ However In the real world, you are dealing with firms large
enough to affect the market price
▪ In many such markets there are handful of firms who
dominate in one way or other.
▪ Such markets are market of imperfect competition.

3. Imperfect Competition
▪ For a given technology, prices are higher and outputs are lower
under imperfect competition than under perfect competition
▪ Large firms are having the advantages of economies of scale
and are responsible for much of the innovation that propels
long-term economic growth
▪ If you understand how imperfectly competitive markets work,
you will have a much deeper understanding of modern
industrial economies.
▪ If a firm can affect the market price of its output, the firm is
classified as an imperfect competition.

4. Imperfect Competition
▪ Imperfect competition prevails in an industry whenever individual
sellers can affect the price of their output.
▪ The major kinds of imperfect competition are monopoly, oligopoly
and monopolistic competition.
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Imperfect competition does not
imply that a firm has absolute
control over the price of its
products. Firm’s control over
price will differ from industry to
industry.

5. Imperfect Competition
▪ Monopoly
Monopoly is a market situation in which a single seller with complete control
over an industry. Monopolist is the only firm producing in its industry.
▪ Oligopoly
Oligopoly means few (two or large) sellers. In oligopoly each individual firm can
affect the marker price.
▪ Monopolistic Competition
A large number of sellers produce differentiated products.