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Micro economics business and competitive markets ppt mba

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Micro economics business and competitive markets ppt bec bagalkot mba By BABASAB PATIL BEC BAGALKOT MBA

Micro economics business and competitive markets ppt bec bagalkot mba By BABASAB PATIL BEC BAGALKOT MBA

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  • 1. Competitive Markets Microeconomics for Business Babasabpatilfreepptmba.com
  • 2. The Perfect Competition Model • Sellers are price-takers • Sellers do not behave strategically • Entry into the market is free • Buyers are price-takers Babasabpatilfreepptmba.com
  • 3. Market Structure • Large number of buyers • Large number of sellers, each with negligible market share • Homogeneous products • Well informed buyers • No barriers to entry m mkt firm ε ε = Babasabpatilfreepptmba.com
  • 4. Short Run Equilibrium • Short run market demand is less price elastic than long run • A fixed number of firms in the market • Firms operating on their short run supply curves • Market supply is sum of each firm’s supply Babasabpatilfreepptmba.com
  • 5. Market & Firm Equilibrium (SR) Qty £ MCSR P1 ACSR Qty £ P1 SSR DSR X1x1 Firm Market C1 Babasabpatilfreepptmba.com
  • 6. Long Run Equilibrium • Long run market demand is more price elastic than short run • Number of firms in the market is not fixed – new firms can enter (attracted by economic profits) – loss-making firms can leave • Firms operating on their long run supply curves Babasabpatilfreepptmba.com
  • 7. Long Run Equilibrium Assume that: • All existing and potential new firms have access to same technology and hence face the same costs • Input prices remain constant regardless of number of firms in the market: i.e. constant cost industry Babasabpatilfreepptmba.com
  • 8. Market & Firm Equilibrium (LR) Qty £ MCLR ACLR P* Qty £ SLR DLR X1 Firm Market x1 P* Babasabpatilfreepptmba.com
  • 9. Increasing Cost Industry • As number of firms in the industry increases, input prices and hence long run average costs rise • So long run market supply curve is upward sloping Babasabpatilfreepptmba.com
  • 10. Decreasing Cost Industry • As number of firms in the industry increases, input prices and hence long run average costs fall • So long run market supply curve is downward sloping Babasabpatilfreepptmba.com
  • 11. Efficiency of Competition Babasabpatilfreepptmba.com

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