project on perfect competition
TRANSCRIPT
PROJECT ON PERFECT COMPETITION
Presented By –
Aditi Khot
Murtuza Hasan
Sandeep Nagpal
Manish Telavane
Payal Vadgama
TYPES OF MARKET STRUCTURE Monopoly Oligopoly Dominant Firm Monopolistic Competition Perfect Competition
PERFECT COMPETITION The concept of competition is used in
two ways in economics.Competition as a process is a rivalry among
firms.Competition as the perfectly competitive
market structure.
A PERFECTLY COMPETITIVE MARKET• A perfectly
competitive market is one in which economic forces operate unimpeded. •Many firms, all making the same product. Each firm’s output level is very small relative to the total output level.
ASSUMPTIONS: There are many buyers and sellers,
each firm is a price-taker. Identical output produced by each firm –
homogeneous products that are perfect substitutes for each other.
All firms (industry participants and new entrants) have equal access to resources (e.g. technology)
No barriers to entry & exit of firms in long run – the market is open to competition from new suppliers.
No externalities in production and consumption
Hypothesis:
Each Seller is Perfect Competitor and Each Buyer is the King.
LINKING ROAD -MANY BUYERS AND MANY SELLERS
LINKING ROAD – IDENTICAL PRODUCTS AND PERFECT SUBSTITUTES
DETERMINING PROFITS GRAPHICALLY
(a) Profit case (b) Zero profit case (c) Loss caseQuantity Quantity Quantity
Price65 60 55 50 45 40 35 30 25 20 15 10
5 0
65 60 55 50 45 40 35 30 25 20 15 10
5 01 2 3 4 5 6 7 8 9 10 12 1 2 3 4 5 6 7 8 9 10 12
D
MC
A P = MR
B ATCAVC
E
Profit
C
MC
ATC
AVC
MC
ATC
AVC
Loss
65 60 55 50 45 40 35 30 25 20 15 10
5 0 1 2 3 4 5 6 7 8 910 12
P = MRP = MR
Price Price
THE SHUTDOWN DECISION
MC
P = MR
2 4 6 8 Quantity
Price
60
50
40
30
20
10
0
ATC
AVC
Loss
A$17.80
CONCLUSION
Price-takers market.
Homogeneous products that are perfect substitutes?
All firms have equal access to resources (e.g.technology)
Free entry & exit of firms
No externalities in production and consumption