1 / 15

LOOK AT THE PAPER!

Date : March 30, 2011 Topic : Perfect Competition Aim : Why is perfect competition beneficial to a free market society? Do Now : Handout. LOOK AT THE PAPER!. BE THE PAPER!. Market Structure:. Perfect/Pure Competition-

norm
Télécharger la présentation

LOOK AT THE PAPER!

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Date: March 30, 2011Topic: Perfect CompetitionAim: Why is perfect competition beneficial to a free market society?Do Now: Handout

  2. LOOK AT THE PAPER! • BE THE PAPER!

  3. Market Structure: Perfect/Pure Competition- • Large number of firms all producing essentially the same product at the same price. • Assumes that the Market is in Equilibrium. • Producers make decisions on how much to produce (given their production costs & the market price)

  4. 4 Conditions for Perfect Competition • Many buyers and sellers participate in the market. • Sellers offer identical products. • Buyers sellers are well informed about products. • Sellers are able to enter and exit the market freely.

  5. Example Farms

  6. Many Buyers and Sellers • Perfectly competitive markets: require many participants on both the buying and selling sides. • NO individual can be powerful enough to buy or sell enough goods to influence the total market quantity or the market price.

  7. Identical Product • No difference between the products sold by different suppliers. • A product that is considered the same regardless of who makes or sells it. • Always choose the lowest price. Examples: Low-end gasoline, milk, notebook paper, sugar. Commodity:

  8. Informed Buyers and Sellers • Know enough about the market to find the best deal they can get. • The Market provides the buyer with full information about the features of the product and its price.

  9. Free Market Entry and Exit • Firms must be able to enter markets when they can make money, leave when they can’t earn enough to stay in business • Markets with more firms/more competition= lower prices

  10. Barriers to Entry • Factors that make it difficult for new firms to enter a market • Barriers to entry can lead to Imperfect competition • Common barriers: 1) Start-up Cost 2) Technology

  11. A.) Start-up Costs • Entrepreneurs need to invest money in a new firm before earning income. • The expenses that a new business must pay before the first product reaches the costumers- Start up Costs.

  12. B. Technology • New Entrepreneurs cannot easily enter markets without a lot of technological preparation and study. • Barriers of technology and know-how can keep a market from becoming perfectly competitive.

  13. Summary: To what extent is competition beneficial to a Free-Market economy?

More Related