Sunday, 31 July 2011

What is meant by market imperfection it is an impediment in the achievement of optimum allocation of resources

Imperfection of Market :-
In a free enterprise economy demand and supply forces determine the prices of various goods and services.The reward of four factors of production is also determined according the demand and supply. The allocation of resources is optimum and if improves the production of various sectors. If any authority interferes in the working of free enterprise economy it reduces the rate of development.
In the under developed countries the working of market is imperfect which causes low production.

Causes of Market Imperfection or Defects in the Market System

1. Immobility of Factors of Production :-
In the less developed countries factors of production are not ready to move from one place to another and from one sector to another for higher return.

2. Rigid Price System :-
In the less developed countries rate of profit, rate of investment, rate of employment is very low due to the rigid price system. If the prices are allowed to fluctuate according to the demand and supply it will increase the rate of profit and rate of investment in the country of competition among the buyers and sellers.

3. Rigid Social Structure :-
In the less developed countries social structure is also creating obstacles in the way of market perfection. Producer and consumer both are suffering a loss because of competition among the buyers and sellers.

4. Role of Middleman :-
In the developing countries middleman is enjoying maximum profit. Producers are unable to achieve the reasonable prices of their production. It makes the market imperfect.

5 Ignorance About Market Condition :-
In the developing countries buyers ans sellers don't know the market condition. So the same price can not prevail in the market.

6. Lack of Specialization :-
There is a lack of specialization in the production process. The developing countries are unable to produce the commodities on large scale. Cost of production is also high and due to this demand is low. It makes the market imperfect.

7. Attitude of the People :-
In the less developed countries people generally purchase the commodities from the nearest shop instead of checking the price on various shops. Sometimes consumer likes to purchase the goods from their friends even they charge high prices it makes the market imperfect.

8. Monopolies :-
Producers generally create monopolies to earn maximum profit. These monopolies are the main obstacles in the way of perfect market.

9. Hoarding :-
Sometimes businessman creates shortage of goods in the market by hoarding the production. Due to this our market is imperfect.

10. Unequal Distribution of Wealth :-
In most of developing countries distribution of wealth is not equal. So it is also the main cause of market imperfection.


1. Increases Mobility :-
The mobility of the factors of production should be improved to make the market perfect.

2. Improvement in Transport System :-
To improve the market system of the country government should improve the transport and communication system in the country.

3. Monopolies Should be Discouraged :-
Government should adopt such measures that monopolies should be discouraged.

4. Market Information :-
Government should provide all the information's about the market conditions. In this regard newspapers, radio and T.V can play its role more effectively.

5. Utilization of Resources :-
There should be a maximum utilization of productive resources. It will improve the market condition.

Summing up we can say that market mechanism can play very effective role but in the present age the interference of the government is essential upto some extant for the economic development of any country.


Anonymous,  21 February 2012 at 04:43  

love this blog site, but the font/color scheme is very difficult to read. light blue on white. please, make it easier to actually read.

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