Imperfect markets deviate from perfect competition, featuring monopolies, oligopolies, or differentiated products. These markets lack perfect information, face barriers, and often result in price distortions, reduced output, and inefficiencies in resource allocation.
Imperfect markets in economics deviate from the idealized model of perfect competition. They encompass various market structures like monopolies, where a single seller controls the market; oligopolies, with a few dominant firms; and monopolistic competition, featuring differentiated products.
These markets often lack perfect information, face barriers to entry, or exhibit pricing power, impacting consumer choices and market outcomes. Imperfect markets may result in higher prices, reduced output, and inefficiencies due to firms' abilities to influence prices or limit competition.
As a consequence, resource allocation might be suboptimal, and consumer welfare can be compromised compared to the theoretical conditions of perfect competition. Government interventions, regulations, measures often aim to mitigate these imperfections.
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What is an imperfect market in economics?