Question

Read the passage given below and answer the questions that follow.

In May 2016, the Ministry of Petroleum and Natural Gas (MOPNG), introduced the ‘Pradhan Mantri Ujjwala Yojana’ (PMUY) as a flagship scheme with an objective tomake clean cooking fuel such as LPG available to the rural and deprived households. Under the Union Budget for the Financial year 2021-22, provision for release of additional 1 Crore LPG connections was made. In this phase, special facility was given to migrant families. LPG belongs to a market form where small number of competitors produce a relatively homogenous product and are aware of one another’s presence. To survive in the market, they have to match one another’s marketing strategy which sometimes influences the prices of their own products.

1. Identify the form of market referred to in the above passage. Name any two industries which come under the same market form.
2. Explain any two important features of the market form referred to in the passage.
3. Briefly discuss the nature of demand curve in this form of market.
4. Distinguish between perfect competition and imperfect competition on the following basis:
   1. Nature of product
   2. Nature of demand curve

Answer 1

i. Oligopoly is the type of market that is being talked about in the text. Two types of businesses that work in an oligopoly market arrangement are:

1. Automobile industry (e.g., Maruti Suzuki, Hyundai, Tata Motors)
2. Telecommunication industry (e.g., Jio, Airtel, Vodafone-Idea)

ii. Two Important Features of Oligopoly:

1. Few Large Firms: A small number of firms dominate the market and each firm’s actions influence others.
2. Interdependence: Firms closely monitor competitors’ pricing and marketing strategies and often respond accordingly.

iii. Nature of the Demand Curve in Oligopoly: In an oligopoly, prices stay the same, so the demand curve is curved. Companies that raise prices might not get rivals to do the same, which could cause them to lose market share. But if it drops its price, other companies might do the same, which could lead to a price war. At the current market price, this makes a bend in the demand curve, with a steeper curve above it and a lower curve below it.

iv. 

Basis	Perfect Competition	Imperfect competition
(a) Nature of Product	Homogeneous (identical) products with no differentiation.	Differentiated or heterogeneous products (branding, quality variations, etc.).
(b) Nature of Demand Curve	Perfectly elastic (horizontal) demand curve; firms are price takers.	Downward sloping demand curve; firms have some control over price.