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A perfectly competitive market is one where there are multiple sellers selling similar commodities. With our perfectly-competitive-market case distress prices assignment help manual you will get a detailed idea of this whole subject.
An insight to Perfect Market:
Conditions that tells that a particular market is a perfect market:
- No barriers to entry and exit of firms in the market–
In a perfect market, any firm can take an entry in the market. There is no monopoly as to which firm will stay and which will leave.
- Homogeneous Products–
No differentiated products are available. All products of every firm are more or less similar.
- A number of buyers and sellers–
There are a large number of buyers & sellers in the market.
- Price Taker-
As there is a large number of buyers and sellers. Nobody is in the position to decide a particular price for the products in the market. Our perfectly-competitive-market case distress prices assignment help manual is always there for you!
Pricing Model in Perfect Market:
The firm can sell as much as it wants as it wants at the current market price.In this market, all firms are price takers.
So, Market Price will be Price x Quantity.
Total Revenue = Price x Quantity
Marginal Revenue – The revenue that a firm earns on selling an additional unit will always be equal to the market price.
An assumption of the model:
- Buyer and Seller accept the market price given.
- Identical goods
-An Illustration:
If the price of a good is $20 in the market. And if the firm sells 10units a day then the total revenue of the day will be 20 x 10 = 200. The marginal revenue associated with the producing an extra unit of the day that is the eleventh unit would be the market price i.e. $20. Total revenue of the day would increase to 20 x 11 =220.
Marginal cost will always vary. It will depend on the quantity produced.
Each market maximizes its profits, given the prevailing market price. The quantity supplied in the market is equal to the demand in the market for that product.
Production Cost in Perfectly Competitive Market
Types of the cost involved in production cost:
Fixed Cost: Cost that is fixed and does not change with the change in quantity is referred to as fixed cost.
Variable Cost: Cost that keeps on changing with the change in the quantity is a variable cost.
Total Cost: Adding fixed cost to variable cost it is termed as total cost.
Benefits of Perfect Competition Market:
- No monopoly power– As there is barriers to entry and exit of firms. Any firm can be in the market.
- Perfect Knowledge– As there is perfect knowledge in the market there is no information failure.
- Less expenditure on advertisement – No need to spend more on the advertisement.
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