Taking into consideration the wheat products market in the United States it is evident that because of the availability of wheat there are so many companies in this market. Wheat forms one of the main components of food consumption globally and so its products’ market constitute a larger share of the United States market (Smith & Antle, 2009). Wheat is grown widely in the United States and which contribute to the existence of many different brands of wheat flour. The availability of many farms selling wheat deprives sellers (wheat milling companies) of control over prices; they are price takes. The buyers in this are mainly pastry shops, and coffee shops: these provide a ready market for the products. These products follow the characteristics of competitive market in that there are many companies providing wheat flour and even a greater number utilizing the product. Also the flour from the different brands is similar with only a difference in product name (Smith & Antle, 2009). Availability of the raw material and market for the product provide ease of entrance into the market.
The availability of many players in the market has ensured that prices are constant with the market deciding the prices. The wheat farmers can only use price to compete if they reduce their prices. The United States government controls pricing which ensures consumers are not exploited. Setting of maximum prices and minimum pricing is important in protecting interests of the poor who depend on this product for survival. Also, this protects the small firms from unfair competition from already established companies. This government regulation ensures standardization of prices.
A perfect competitive environment is where there exist many buyers and sellers offering a homogeneous product to the market. The structure is characterized by many buyers and sellers and therefore no firm controls the prices single handedly (Machovec, 2007). Also the market structures are very similar, and lastly firms are free to enter or exit the market. There is little chance of a market to poses these three conditions; therefore there exists no market with complete perfect competition though some industries have achieved an almost perfect competitive structure. This market is desirable for the society because prices charged are reasonably fair. Therefore a manufacturer cannot increase prices of goods as they risk losing their market share; sellers in such a market are price takers and not makers. Existence of perfect competition ensures that consumers have constant supply and distributers have a ready demand. Economists believe that a perfect competitive market is the best structure in protecting consumers’ interests (Machovec, 2007).
Machovec, F. (2007). Perfect Competition and the Transformation of Economics. New York,
N Y: Routledge.
Smith, V. & Antle, J. (2009). The Economics of Wheat Markets. London: Cabi Publishing.