Perfect Competition :: Brisbane Australia Restaurants

Brisbane, Australia, is the third largest city; where it serves up some of Australia’s best culinary finds. There is a marvellous collection of Brisbane restaurants with everything from stylish boutique eateries featuring top chefs from around the world to local diners than feature Australian specialities (ABC Integra, 2004). This essay will discuss the extent to which restaurants in Brisbane match the characteristic of a perfectly competitive industry both in the short and long run. Following that, this essay will elaborates on the pros and cons from an economic perspective, the characteristics of a perfectly competitive industry. Comparison between perfect competition and monopolistic along with examples will also be given to further illustrate the best market structures that fit restaurants in Brisbane. It will then be concluded that restaurants in Brisbane does not fit the characteristics of a perfectly competitive industry but rather a monopolistic industry as the only si milarity between restaurants and a perfectly competitive industry is the large number of participants involved. Diagram 1.0 – Perfect Competition Perfect competition (as shown above) is a market structure characterised by a large number of small firms, a homogenous product, and very easy entry into, or exit from, the market (Layton, Robert & Tucker, 2002, p.173). The characteristic of a large number of small firms is fulfilled when each firm in a market has no significant share of total output and has no ability to affect the product’s market price. Each firms work autonomously, rather than coordinating decisions collectively (Layton, Robert & Tucker, 2002, p. 173). Restaurants in Brisbane do not fit this characteristic as restaurants are more fitted under monopolistic competition; exist under a large number of firms where no single firm can influence the market outcome. For example, Michael’s Riverside in Brisbane serves some of the area’s best seafood (ABC Integra, 2004). Even so, Michael’s unable to influence the market outcome, but is able to set the prices higher than rival restaurants without fear of losing its customers. This is due to product differentiation (Layton, Robert & Tucker, 2002, p.233). Consumer demand for differentiated products is described using two distinct approaches – the heterogenous demand and homogenous demand. The heterogenous demand assumes that each consumer has a demand for multiple varieties of a product over time and the homogenous demand assumes that each product consists of a collection of different characteristics such as in location, atmosphere, quality of food, style, services and price (Suranovic, 1997).