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

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Micro economics business and competitive markets ppt mba

  1. 1. Competitive Markets Microeconomics for Business Babasabpatilfreepptmba.com
  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 Babasabpatilfreepptmba.com
  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 m mkt firm ε ε = Babasabpatilfreepptmba.com
  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 Babasabpatilfreepptmba.com
  5. 5. Market & Firm Equilibrium (SR) Qty £ MCSR P1 ACSR Qty £ P1 SSR DSR X1x1 Firm Market C1 Babasabpatilfreepptmba.com
  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 Babasabpatilfreepptmba.com
  7. 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. 8. Market & Firm Equilibrium (LR) Qty £ MCLR ACLR P* Qty £ SLR DLR X1 Firm Market x1 P* Babasabpatilfreepptmba.com
  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 Babasabpatilfreepptmba.com
  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 Babasabpatilfreepptmba.com
  11. 11. Efficiency of Competition Babasabpatilfreepptmba.com

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