Most of the products you buy at a grocery store come from what type of competiti
ID: 1164882 • Letter: M
Question
Most of the products you buy at a grocery store come from what type of competitive market? Why do you think this is so? Is this good or bad? What are the social impacts? Note; the question is not about grocery stores, but the products you find there. Think about a few examples of products you regularly purchase, like canned vegetables, breakfast cereal, toothpaste, etc Think about how many different, but very similar items there are on the shelves. (30 different types of toothpaste, 75 different breakfast cereals, etc...) Is this necessary? Is this a waste of resources? Each item has a different name with millions of dollars spent on advertising to help you remember that name. Are we wasting millions of dollars on marketing? What do you think? Is there an alternative way?
Explanation / Answer
The products at a grocery store forms monopolistic competition as each firm sells slightly differentiated goods. It is a good idea. The monopolistic competition promotes competition and makes firms to be innovative to stay in the business. The market structure has easy entry which makes healthy competition and helps to save cost. The social cost involves adoption of malpractices in order to capture market share which needs some sort of quality checks or intervention of government agencies.
In the present global competitive market this kind of market structure is advisable, if not firms will not engage in innovations which would increase cost over period. Yes there would be cost associated with marketing, but to stay in business firms would work out costs structure and operate at low margins which is beneficial for consumers.
The alternate way or the next best market structure is perfect competition which would be difficult for firms to earn market share and customer expectations.
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