Discuss the detail the characteristics of perfect and imperfect markets under the Barriers to entry
A perfect market is characterized by the absence of any barriers to entry. This means that new firms can enter the market freely and compete with existing firms. In a perfect market, all firms have perfect information and have easy access to resources. There are no monopolies or oligopolies, and the market is characterized by perfect competition.
On the other hand, in an imperfect market, there are barriers to entry that prevent new firms from entering the market and competing with existing firms. These barriers can be either natural or artificial and can include regulatory barriers, high start-up costs, economies of scale, and brand loyalty. Firms that enjoy market power can use it to charge higher prices, limit supply, or reduce quality.
In an imperfect market, firms have an advantage over consumers in terms of information asymmetry. This is because firms typically have more information about their products and services than consumers do. This can result in firms charging higher prices or offering lower quality products.
In an imperfect market, firms can also engage in price fixing and other anti-competitive practices to protect their position in the market. This can lead to higher prices for consumers and a lack of innovation and competition in the market.
In summary, perfect markets are characterized by the absence of barriers to entry and perfect competition, while imperfect markets are characterized by barriers to entry, limited competition, and a potential for price fixing and other anti-competitive practices.