country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!
Add File

Error goes here

Outline The Key Factors That Help Determine If a Perfect Competition Has Been Met

Referencing Styles : MLA | Pages : 1

Outline The Key Factors That Help Determine If a Perfect Competition Has Been Met.

In a competitive market, a single consumer or a single seller has no influence over the market price and therefore, has no role to play in the determination of price. Instead the price is determined in the competitive market through the interaction of market demand and market supply.

Price ( Rs. Per shirt)

Quantity demanded (thousand shirts per month)

Quantity supplied (thousand shirts per month)

Market position

Effect on price

(1)

(2)

(3)

(4)

(5)

500

30

56

Excess supply

fall

400

40

50

Excess supply

fall

300

45

45

Equilibrium

same

200

55

35

Excess demand

rise

100

70

20

Excess demand

rise

 

This table places the demand schedule and supply schedule side by side against the same prices. Thus, it shows various quantities of shirts that consumers are willing to buy (col 2) at various prices (col 1) and the various quantities of shirts that the sellers are willing to sell (col 3) at those prices. Market demand is taken to be an inverse function of price. Meaning, when price of the goods fall, the demand of the goods rise. Market supply is directly related to price. Meaning, producers are willing to supply more at a higher price. These two propositions about demand and supply imply that lower the price of the shirt, fewer shirts are offered for sale and more shirts consumers want to buy. The higher the price , more shirts are offered for sale and few are demanded. This indicate that combined demand and supply schedules show the operation of law of demand and law of supply. There is only one price of the shirt i.e Rs.300 at which the quantity demanded and quantity supplied are equal to 45 thousand shirts. Therefore, the equilibrium price is Rs 300, and the equilibrium quantity is 45 thousand. All other prices are disequilibrium prices because quantity demanded does not equal quantity supplied at those prices. First consider the prices below Rs 300. At these prices the consumers are willing to purchase a larger quantity than the producers are willing to sell. Thus, at the price of Rs 100 per shirt, the buyers would be willing to buy  70 thousand shirts whereas suppliers would be willing to supply only 20 thousand shirts. Therefore, the quantity demanded exceeds the quantity supplied by 50 thousand shirts. The amount by which quantity demanded exceeds the quantity supplied is called excess demand.

Features of perfect competition are:

  1. Large number of buyers and sellers – there are large number of buyers and sellers of the commodity under perfect competition. Each are too small to exert any influence on the price of the commodity by his action. This means that under perfect competition, a firm produces such a small part of the total market output that a change in his output will have no noticeable effect on the market supply and hence the price of the commodity. It means that a firm under perfect competition cannot influence the market price by increasing or decreasing the quantity of output it produces. A firm is, therefore, a price – taker rather than a price – maker. Likewise, the number of buyers is so large that no single buyer can influence the market price by changing his demand for the commodity. An individual buyer buys such a small quantity of the total output of the product that any change in the quantity demanded by him has negligible impact on the total market demand and hence, no influence on the market price of the commodity.
  2. Homogeneous product – all the firms produce homogeneous or perfectly standardized commodity under perfect competition. The homogeneity of the product refers to the physical characteristics of the commodity like the colour, size, chemical components, and environmental factors like location of the seller, credit – facilities. It is important to note that it is the total conditions surrounding the sale of the product , which should be considered. A customer will be prepared to pay more for the product sold in more luxurious surroundings or by pleasant sales staff than otherwise. Therefore, homogeneity of the product implies both the physical characteristics of the product and the conditions surrounding the sale, i.e. environmental factors. The products of different firms under perfect competition are indistinguishable from one another, i.e. they are perfect substitutes for one another. This characteristic implies that a uniform price will rule throughout the market. No firm has any basis of charging higher price for its product. If one firm tries to raise the price of product above the market price , it would lose all its customers to other firms selling that product at the market price. Similarly, the buyer has no reason to express his preference for the product of one particular firm, and so he is indifferent to the firm from which he buyes.
  3. Freedom of entry and exit – this means that new firms are free to enter the industry and existing firms are free to leave the industry if they so desire. There is no restrictions , legal or social on the entry of new firms into and the exit of old firms from the industry. This ensures that all the firms end up earning only normal profits in the long run. If existing firms are earning super – normal profits, new firms would enter the industry and increase the total supply in the industry. This would reduce the market price and wipe out the super- normal profits. On the other hand, if existing firms are incurring losses, some of them would start leaving the industry, leading to decrease in supply and rise in the price  till the losses are wiped out.
  4. Perfect mobility of resources -  the resources are perfectly mobile. This characteristics ensures that resources or factors of production can enter or quit a firm or the industry at will. This characteristics implies that the resources are able to switch over from one use  to another without any restriction. This condition is essential to make the entry of the firms into and exit of the firms from the industry possible.
  5. Perfect knowledge – consumers, firms and resource owners under perfect competition have perfect knowledge about the market conditions. Each firms knows the price prevailing in the market and it would not sell the commodity at a price below the market price. Similarly, each buyer has perfect knowledge about the prevailing price and he is not prepared to pay higher prices than the price prevailing in the market. This characteristics of perfect knowledge would ensure that price differences are quickly eliminated and a single price for the commodity would ultimately prevail throughout the market. In the same way, firms have perfect knowledge about the available techniques of production. Each firm is, therefore, able to make use of the best available techniques of production. This implies that all firms have similar cost conditions leading to same per unit cost of production.
  6. Absence of transport costs – buyers and sellers incur no transport costs in purchasing and selling goods. Meaning, there is no transportation cost.

State some great examples that explain perfect competition in real-life scenarios. 

The agricultural markets are examples of perfect competition in real –life scenarios. There are many sellers of vegetables in the local market of the farmers. There are many farmers selling the same fruits, herbs and vegetables. All the prices are same.

The street food vendors have more or less same food items and they sell all the items at the same prices to the customers.

The computer software been sold at same prices at different shops.

Solutions

OR

MyAssignmenthelp.com is the best assignment help provider serving thousands of students in New York City, Boston, Washington D.C. and Chicago. With a team of qualified and experienced online assignment experts, we deal with all types of assignment writing tasks. Our popular assignment help services include marketing assignment help, auditing assignment help, finance assignment help, statistics assignment help, help with law assignments. We guarantee that students, who decide to buy assignments online, get work worth their money and time.

Save Time & improve Grade

Just share requirement and get customized Solution.

watch
question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

Add File

Error goes here

1,466,013

Orders

4.9/5

Overall Rating

5,096

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat. If you are unable to calculate word count online, ask our customer executives.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

234 Order Completed

100% Response Time

Samantha Ji

PhD in Chemistry with Specialization in Organic

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

184 Order Completed

96% Response Time

Arapera Billing

Masters in Management, MMgt

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

265 Order Completed

97% Response Time

Ken Campbell

MSc in Electrical Engineering

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

2830 Order Completed

97% Response Time

Leroy Bicknell

MBA in Marketing

London, United Kingdom

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

excellent assignment, I am really happy with the work I got back, great use of the reading material and references were spot on.

flag

User Id: 392303 - 27 Oct 2020

Australia

student rating student rating student rating student rating student rating

At first i was skeptical about My Assignment Help site and was very worried because it was approaching due time and i was not yet notified of a solution and thought that it was a scum.However ,i was delighted and happy to see My assignment solutions...

flag

User Id: 522706 - 27 Oct 2020

Australia

student rating student rating student rating student rating student rating

I am happy to the result of my grades. Nice work assignment help. Thank you for helping me to do my homework. I will definitely recommend your site to my friends who are struggling too.

flag

User Id: 374274 - 27 Oct 2020

Australia

student rating student rating student rating student rating student rating

i got a good grades.. thank you assignment help. I am always enjoying using this service. I appreciate the hard working efforts. I can now work and study because of your help.

flag

User Id: 374274 - 27 Oct 2020

Australia

student rating student rating student rating student rating student rating
Outline The Key Factors That H... has been added in your library.
callback request mobile
Have any Query?