What is a Market? Explains about Markets and their types

1. PERFECT COMPETITION
Lecture on:
(a) Features of Perfect Competition
(b) Price and Output Determination
B.TECH, (CSE)
Managerial Economics and Financial Analysis
11-2-2013

2. Features of Perfect
Competition:
 Large number of buyers and sellers
 Homogenous products and services
 Free entry and exit
 Perfect information about market
condition
 Perfect mobility of factors of production
 Uniform price level
 No transport cost
 Difference between firm and industry

3. PRICE – OUTPUT DETERMINATION IN
PERFECT COMPETITION
 Prices are determined by demand and
supply forces
 The price and output are determined
at the point where the demand and
supply both are equal under perfect
competition
 This can be understood by taking an
example and plotting it on the graph

4. EXAMPLE AND DIAGRAMATIC EXPLANATION
PRICE (Rs) DEMAND SUPPLY
5.00 200 600
4.00 300 500
3.00 400 400
2.00 500 300
1.00 600 200

5. Diagrammatic Explanation:
Y AXIS
P D S
R E
I
C
E S D
0 X AXIS
OUTPUT

6. Price and output determination when
demand changes and supply remains
constant
Y axis
D1 S
P1 D E1
P E
D2 D1
P2 E2
D
S
D2
0
M2 M M1

7. Price and output determination when demand
remains constant and supply changes
Y axis D S2
P1 E2
S
S2 E
P S1
S E1
P2
S1

8. Price and output determination when
both demand and supply are changed
 Y
D D1
p D2 S2 S S1
R P E2 E E1
I S D S1 D1
C S2 D2
E
0
M2 M M 1 X