2. OUTLINE.
Market Structures
Perfect Competition Definition and Axioms
Examples of perfect competition
Short-run equilibrium
Long-run equilibrium
Shutdown point
Advantages of PC
Money & its functions
Characteristics of Money
Banking
Functions of the central Bank
Functions of commercial banks
Demand for money and the motives for holding it
3. MARKET STRUCTURES
Market- Is an arrangement that brings buyers and sellers
of goods and services together.
Market Structure-The nature and degree of competition
within a particular market.
Types of MS includes......
Perfect competition
Monopolist Competition
Oligopoly
Duopoly
Monopoly
Monopsony
4. PERFECT COMPETITION DEFINITION AND AXIOMS
A market in which there are many buyers and sellers
with no individual power to influence market price.
It is based on the following axioms
Large number of buyers & sellers
Product homogeneity
Free entry and exits of firms
Profit maximization
Perfect mobility of factors of production
Perfect knowledge
No government regulation
6. SHORT-RUN EQUILIBRIUM OF A PCM
A firm is in the short –run equilibrium when it produces the
output that maximizes profit. (P=TR-TC)
It is possible for an individual firm to make abnormal profit.
Graphical
Representation of
A Firm in a short-run
Equilibrium making
Abnormal profit.
7. LONG- RUN EQUILIBRIUM OF A PCM
All firms earn normal profits because other firms can
enter the industry to compete off the any profit being
enjoyed in the short-run.
Graphically,
8. SHUTDOWN-POINT
Shut down point is a point where firm stop producing .
When a firm is making loss, it will have to decide
whether to continue production or not.
9. ADVANTAGES OF PERFECT COMPETITION:
High degree of competition helps allocate
resources to most efficient use
Normal profit made in the long run
Firms operate at maximum efficiency
Consumers benefit
10. MONEY AND ITS FUNCTIONS
Any thing that is generally accepted in exchange for
goods and services and as payment for debt.
Functions:
A medium of exchange or means of payment
A unit of account
A store of value
A standard of deferred payment
Money then can also be define as, anything that is
generally accepted as a medium of exchange, a store of
value, a unit of account, and a standard of deferred
payment.
11. CHARACTERISTICS OF MONEY
Acceptability
Portability
Divisibility
Homogeneity
Duplicability
Durability
Stability of value
12. BANKING
Bank-Any institution that perform essential functions as:
Accept deposits
Offer draft
Make loans
Commercial Bank-Any bank that accepts deposit and
transacts business(including creating credit) with the aim
of making profit.
Central Bank- Is the bank at the apex of the banking
system of a country or region.
It is designed to supervise the banking system and regulate the
quantity of money in the economy.
13. FUNCTIONS OF COMMERCIAL BANKS
Accepts deposit
Demand deposit(current account)
Time deposit
Savings deposit
Lending money to their customers
Act as agent for their customers
Foreign trade financiers
Store of valuables for their customers
Payment of wages on behalf of Customers
and Government
14. FUNCTIONS OF CENTRAL BANKS
Supervision of the financial system
Issues & withdraws notes and coins
Government’s Bank
Management and administration of national debt
Implementation of monetary policy
Acting as the banker’s bank
Lender of last resort
Manages the exchange rate policy
Research work
15. DEMAND FOR MONEY & MOTIVES FOR
HOLDING MONEY
Demand for money describes the desire or willingness to
hold a given stock of money for any reason.
It is the desire of individuals and firms to hold cash instead
of investing it.
Motives
Transactionary Demand for money
Financial Innovations like ATM
Institutional factors e.g. time between paydays
The size of the firm
The Price level
Precautionary Demand for money
Speculative Demand for money-
16. REFERENCE(S)
http://encyclopedia.thefreedictionary.com/Perfect+competito
n
Bernard Guerrien, economics and mathematices teacher in
Paris Panthéon-Sorbonne
The Arrow-Debreu model has nothing to do with competition
and markets
A handout on micro and macro economics by Prof.
Lawrence Adu Kofi(University of Cape Coast, Ghan
GROUP MEMBERS
Afreh Kwame, Adewale Ademoye, Elisante Kimambo and
Abel Sunday