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Lesson 2: perfect market – introduction to perfect competition

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BY THE END OF THIS LESSON, YOU SHOULD BE ABLE TO: DEFINE A PERFECT MARKET LIST AND DISCUSS THE CHARACTERISTICS OF A PERFECT MARKET EXPLAIN AND ILLUSTRATE HOW PRICES ARE DETERMINED IN THIS FIRM EXPLAIN THE KINDS OF PROFITS MADE

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This market is characterised by many businesses which have no control or influence over price.    Sellers in this market structure are known as ‘price takers’ as they have no influence over prices.

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Simple Examples That Help Us Understand Perfect Competition - Business Zeal

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Perfect And Imperfect Competition - Lessons - Blendspace

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PRICE DETERMINATION IN PERFECT COMPETITION

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KEY NOTES ECONOMIC PROFITS ARE ONLY MADE IN THE SHORT RUN. NORMAL PROFITS ARE MADE IN THE LONG RUN. ECONOMIC LOSS IS MADE IN SHORT RUN

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PERFECTLY COMPETITIVE FIRMS ARE VERY DOMINANT IN THE MARKET AS THEY SELL IDENTICAL PRODUCTS. THINK OF THE STREET VENDORS. HOW MANY OF THEM ARE SELLING TOMATOES? MY POINT EXACTLY. THESE FIRMS CAN SELL AS MUCH AS THEY LIKE BUT THEY CANNOT CHARGE THEIR OWN PRICE AS THEY HAVE NO POWER TO DO SO. AS A BUYER YOU KNOW ABOUT THE GOODS AND SERVICES OFFERED IN THE MARKET AND HOW MUCH THEY COST.

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A group of cupcakes

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