Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
COMPETITIVE MARKETS   Microeconomics for Business
The Perfect Competition Model   Sellers are price-takers   Sellers do not behave strategically   Entry into the market ...
Market Structure   Large number of buyers   Large number of sellers, each with negligible market    share   Homogeneous...
Short Run Equilibrium   Short run market demand is less price elastic than    long run   A fixed number of firms in the ...
Market & Firm Equilibrium (SR)             Firm               Market                                           SSR£       ...
Long Run Equilibrium   Long run market demand is more price elastic than    short run   Number of firms in the market is...
Long Run EquilibriumAssume that: All existing and potential new firms have access to  same technology and hence face the ...
Market & Firm Equilibrium (LR)            Firm               Market£                         £                   MCLR     ...
Increasing Cost Industry   As number of firms in the industry increases, input    prices and hence long run average costs...
Decreasing Cost Industry   As number of firms in the industry increases, input    prices and hence long run average costs...
Efficiency of Competition
Upcoming SlideShare
Loading in …5
×

Competitive markets ppt MBA

689 views

Published on

Competitive markets ppt @ bec doms bagalkot mba BY BABASAB PATIL

Published in: Business, Economy & Finance
  • Be the first to comment

Competitive markets ppt MBA

  1. 1. COMPETITIVE MARKETS Microeconomics for Business
  2. 2. The Perfect Competition Model Sellers are price-takers Sellers do not behave strategically Entry into the market is free Buyers are price-takers
  3. 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 ε mkt ε firm = m
  4. 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
  5. 5. Market & Firm Equilibrium (SR) Firm Market SSR£ £ MCSR ACSRP1 P1 C1 DSR x1 Qty X1 Qty
  6. 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
  7. 7. Long Run EquilibriumAssume 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
  8. 8. Market & Firm Equilibrium (LR) Firm Market£ £ MCLR ACLR SLRP* P* DLR x1 Qty X1 Qty
  9. 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
  10. 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
  11. 11. Efficiency of Competition

×