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# How to draw market structure diagrams

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Economics students find 4 easy steps to construct economics diagrams

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### How to draw market structure diagrams

1. 1. HOW TO DRAWMARKET STRUCTURE DIAGRAMS dineshbakshi.com4 Easy steps to drawing effective market structure diagrams
2. 2. PEREFCTCOMPETITION dineshbakshi.com
3. 3. STEP 1DRAW THE Cost/Revenue DEMAND CURVE P D = MR = AR Output/Sales
4. 4. STEP 2 MC MC WHEN AC IS WHEN AC ISCost/Revenue Cost/Revenue ABOVE THE AR BELOW THE AR CURVE IT IS A CURVE IT IS A LOSS AC LOSS AC P D = MR = AR P D = MR = AR Output/Sales Output/Sales PLACE THE AC & MC CURVE
5. 5. STEP 3 MC MCCost/Revenue Cost/Revenue AC AC P D = MR = AR P D = MR = AR Q Q Output/Sales Output/Sales IDENTIFY THE PROFIT MAXIMISATION LEVEL OF OUTPUT
6. 6. STEP 4 MC MCCost/Revenue Cost/Revenue AC AC P LOSS D = MR = AR P D = MR = AR Abnormal Profit Q Q Output/Sales Output/SalesSHADE THE REGION BETWEEN AC CURVE AR CURVE TO SHOW THE LOSS OR PROFIT
7. 7. MONPOLY ANDMONOPOLISTICCOMPETITION dineshbakshi.com
8. 8. Cost/RevenueThe only difference in drawingthe diagrams for perfectcompetition or any othermarket structure is the shape P D = MR = ARof the demand curve(AR)For perfect competition the Output/SalesAR=MR is perfectly elastic Cost/Revenuewhereas for other marketstructures the demand curve(AR] curve is normal i.e. slopes Pdownward to the right and theMR curve is place below the AR D =ARcurve (twice the distance] MR Output/Sales
9. 9. STEP 1DRAW THE Cost/Revenue DEMAND CURVE D =AR MR Output/Sales
10. 10. WHEN AC IS ABOVE THE AR STEP 2 MC WHEN AC IS MC CURVE IT IS A BELOW THE LOSS AR CURVE ITCost/Revenue Cost/Revenue IS A LOSS AC D =AR D =AR MR MR Q Output/Sales Output/Sales PLACE THE AC & MC CURVE
11. 11. STEP 3 MC MCCost/Revenue Cost/Revenue AC D =AR D =AR MR MR Q Output/Sales Q Output/Sales IDENTIFY THE PROFIT MAXIMISATION LEVEL OF OUTPUT MC = MR
12. 12. STEP 4 MC MCCost/Revenue Cost/Revenue LOSS AC Abnormal Profit D =AR D =AR MR MR Q Output/Sales Q Output/SalesSHADE THE REGION BETWEEN AC CURVE AR CURVE TO SHOW THE LOSS OR PROFIT
13. 13. Congratulations !! Youhave mastered the art of drawing market structure diagrams