Market Analysis of Taco Truck in California

Introduction

An analysis of the Taco Truck business in California reveals that it is an example of perfect competition. Elements such as the barriers to entry, the absence of externalities, and the realization of normal profits in the short run speak to the characterization. This memo delves into these characteristics as applies to the perfectly competitive industry.

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Number of Firms

The number of taco trucks in California is immeasurable. These include the Don Chow Tacos, QDOBA Mexican Eats, and several other small taco stands that are lined along the streets. The presence of a large number of sellers is one of the defining characteristics of perfect competition.

Size of Firms

Most of the businesses such as those trucks that are situated along the streets of California qualify as small businesses. These have a small market area and n average of about three employees. On the other hand, firms such as QDOBA are franchises and do not qualify as small businesses.

Number of Consumers

A large number of firms attract an equally large number of consumers. Taco lovers are the number one customers for these businesses. Also, individuals that fancy fresh and diverse cultured foods are the ideal consumers and these are unlimited.

Relatively Homogenous Products

It is nearly impossible to differentiate between the tacos sold in QDOBA and those from a random taco truck on the street. All vendors use fresh ingredients to achieve similarly-tasting tacos. As such, the consumers do not prefer one vendor over the other on taste basis. The homogeneity of the products influences the uniformity of price. Inherently, consumers are not biased to make purchases on a price basis.

Freedom of Entry and Exit

There are few barriers to the entry of the taco truck market including licenses. However, these cannot be compared with the relatively high cost of opening a restaurant. As such, the few restrictions encourage entry and exit from the market as is expected for perfect competition.

Perfect Knowledge of the Market

Word of mouth plays a central role in the spread of knowledge on price and quality. The buyers identify their favorite trucks and spread the word about the vendors to the other consumers. Also, the proximity of these trucks makes it easy for the sellers to survey their competitors and they can use the relevant information to adjust their prices and services accordingly.

Price Takers

The average price of a taco is about $2. Occasionally, the vendors make offers to encourage bulk purchases as well as to attract consumers. The uniformity in price is informed by the seller's negligible contribution to the total supply of the product rendering them price takers.

Conclusion

Based on the evidence presented herein, the taco truck market qualifies as perfect competition.