scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 958
What are the assumptions behind the model of a perfectly competitive industry in long-run equilibrium In this essay I will discuss the assumptions behind the model of a perfectly competitive industry in long-run equilibrium The economists model of perfect competition is highly theoretical but is does provide a useful tool of economic analysis In perfect competition the industry is made up of a large number of small firms each selling homogeneous identical products to a great number of buyers In competition all firms are too small to have an influence and so they will act as price takers and will charge at the equilibrium P1 Figure 1 A perfectly competitive market has to have homogenous products so that if these conditions will exist buyers will have no preference for the goods just a preference for the supplier There must be a great amount of buyers and suppliers so that one buyer or supplier will not influence the market price Buyers are assumed to have perfect knowledge of what is happening on the market the market conditions in every part of the market Equally do the suppliers have to be fully aware of he activities of buyers and other sellers perfect information The buyers cannot have any barriers to the movement from one supplier to the other In perfect market situation there will be only one market price which cannot be controlled in any way by any buyer or supplier Firms are not permitted to charge different prices because this will cause their customers to go to the other companies with the identical product causing the producer with the higher price to loose popularity and decreasing the amount of profit that they will receive It then will eventually not be attractive to remain in the market for this company as it will be loosing too much money So if this happens the company will have to change the price in order to get
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA