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Economics Denzel Presentation (Perfect Competition)

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Economics Denzel Presentation (Perfect Competition)

  1. 1. Denzel Partnership Presents <ul><li>Sushi 360º </li></ul>
  2. 2. The Nature of Our Market <ul><li>Perfect competition </li></ul><ul><li>Our competition is fierce </li></ul><ul><li>Advertising is useless </li></ul><ul><li>All information is public </li></ul>
  3. 3. The Nature of Our Market <ul><li>Demand is extremely elastic </li></ul><ul><li>The large market reigns supreme over prices </li></ul><ul><li>Every product is substitutable with others in the market </li></ul><ul><li>Efficient </li></ul><ul><li>Easy entry and exit </li></ul>
  4. 4. Graphs <ul><li>Important points of perfect competition </li></ul>
  5. 5. Quantity Cost P = MR= AR= D Long run equilibrium in perfect competition MC AC Qe 0
  6. 6. Long-run equilibrium (industry) Price Quantity S D 0 P Q^ (industry)
  7. 7. Cost Quantity P = MR= AR= D MC AC Q1 C P1 Firm in perfect competition making supernormal profit 0
  8. 8. Price Quantity S1 D P1 Q1 S2 P2 Q2 0 Cost Quantity P1 MC AC Q1 C P1 P2 Q2 The impact on a market of supernormal profit 0
  9. 9. Short-run losses Cost Quantity C P Q Loss MC AC P=MR=AR=D
  10. 10. Break-even price Cost Quantity MC AC P=MR=AR=D
  11. 11. Shut down point Cost Output MC AC P=MR=AR=D AVC C E D B P A P1 Q 0 Loss
  12. 12. How We Determine Cost <ul><li>Price is completely determined by the market </li></ul><ul><li>Price takers not price makers </li></ul><ul><li>Costs must meet market price </li></ul><ul><li>Variable: wages, supplies </li></ul><ul><li>Fixed: rent </li></ul>
  13. 13. Advantages <ul><li>We can easily enter the market with little investment </li></ul><ul><li>Necessity for efficiency keeps us competitive </li></ul><ul><li>We have a huge market before us </li></ul><ul><li>Free information can keep us innovative </li></ul><ul><li>Safe and reliable investment </li></ul>
  14. 14. Disadvantages <ul><li>Stolen innovation </li></ul><ul><li>No control of the market </li></ul><ul><li>Only way to improve is cost reduction </li></ul><ul><li>Small </li></ul><ul><li>Returns not too impressive </li></ul>
  15. 15. Farewell <ul><li>Live long and prosper. </li></ul>