Effect of Change in Price on Output in Perfect Competition

2. MARKET
• Place or locality
where goods are
sold or
purchased.
• In economics,
place can be
substituted by
whole region,
town or a
country.

3. Perfect Competition
Imperfect Competition
1. Monopolistic Competition
2. Pure Oligopoly
3. Differentiated Oligopoly
Monopoly

4. Large number of Firms—
1. Increase or decrease in output by
individual firm has negligible effect on
total supply.
2. Individual firm is price taker & output
adjuster.

5. Homogenous Products—
1. Identical products.
2. Perfect substitutes for each other.
3. Control over price is eliminated.
4. No trade marks, Patents, Special
brands etc.

6. Information about prevailing price –
1. Buyers should know price so that
sellers can’t charge more.
2. Sellers should also know price so that
no one will charge less than that price.

7. Free Entry and Exit –
1. Freedom to firms for entry and exit.
2. No barriers for entry of new firms.

8. • Demand and Supply both are important in
price determination.
• Fall in price--quantity demanded rises.
• Rise in price--quantity demanded falls.
• At intersection, Price quantity equilibrium is
there.
• At only equilibrium price, Demand and supply
curve intersect.

9.  Price will rise to level of equilibrium where
buyers and sellers will be satisfied.
 Have to have equilibrium between demand
and supply.
 This condition will only prevail in the market.