PERFECT COMPETITION

PRESENTED BY:

MADHU BALA

CONTENTS

• INTRODUCTION

• MEANING OF PERFECT COMPETITION

• CHARACTERISTICS OF PERFECT COMPETITION

• TWO VITAL CONCLUSIONS

• DEMAND CURVE

WHAT IS MARKET?

MARKET REFERS TO A MECHANISM OE AN ARRANGEMENT THAT FACILITATES THE SALE AND PURCHASE OF GOODS AND SERVICES.

PERFECT COMPETITION

IT IS A TYPE OF MARKET WITH LARGE NUMBER OF

BUYERS AND SELLERS.

CHARACTERISTICS OFPERFECT COMPETITION

LARE NUMBER OF FIRMS

LARGE NUMBER OF SELLERS

LARGE NUMBER OF BUYERS

HOMOGENEOUS PRODUCT

PERECT KNOWLEDGE

FREE ENTRY AND EXIT OF FIRMS

INDEPENDENT DECISION MAKING

PERFECT MOBILITY

NO EXTRA TRANSPORTATION COST

TWO VITAL CONCLUSIONS

I. A FIRM UNDER PERFECT COMPETITION IS PRICE

TAKER, NOT PRICE MAKER

II. DEMAND CURVE UNDER PERFECT COMPETITION IS

PERFECTLY ELASTIC.

DEMAND CURVE

DEMAND CURVE IS PERFECTLY ELASTIC FOR A FIRM.

IT MEANS THAT:FIRM CAN SELL ANY COMMODITY AT

AT THE PREVAILING PRICE.