Besides the advantages of a perfectly competitive market, there are also several disadvantages, namely:
- a. Because the goods sold are homogeneous, consumers feel limited in purchasing other products outside of the homogeneous goods.
- b. It is very difficult to market products whose brands are not that big or are not on the list of homogeneous products.
- c. Limiting producers in innovating to develop their products because they are too satisfied and comfortable producing homogeneous goods.
- Does not encourage innovation
The ease of companies entering the market is driven by the ease of copying products produced by predecessor producers. This situation makes producers reluctant to innovate in producing products.
- Limiting consumer choices
The goods produced by producers in a perfectly competitive market are identical to each other so that they have limited choices in determining which goods to consume.
Limited choices will result in many consumer needs that cannot be met.
- Unequal distribution of income
A certain pattern of income distribution creates a certain pattern of demand in society. This pattern of demand will determine the form of resource allocation.
This means that income distribution determines how efficient resource use is. If income distribution is uneven, then the use of resources allocated efficiently will be used more for the benefit of a certain group.
- Corporate behavior in the short term
Producers in a perfectly competitive market are usually small producers. In calculating the profits obtained, the company will compare the total revenue received with the total costs incurred.
Total revenue is the multiplication of what happens in the market. Maximizing profit is one of the company’s goals in producing goods.
Other objectives are sales maximization, company growth, and management satisfaction. In the short run, it is assumed that the number of producers is fixed and no firms enter or exit the market.
- Long term behavior
In the long run, many companies will enter and exit the market. The entry of new companies producing the same goods will increase the number of goods offered in the market.This condition will lower the prices that occur and this price reduction will reduce the level of profit obtained.If there are no more additional profits that can be obtained by the company, then no more new companies will enter the company.