This document provides an overview of perfect competition markets. It defines key terms like market and discusses the classification of different market forms. The main features of a perfect competition market are described as having many small producers and sellers of homogeneous products, with no single seller influencing price and all being price takers. Firms have perfect knowledge and no transport, selling, or advertising costs. The market price is determined by the intersection of industry demand and supply curves. Individual firms are price takers and maximize profits where marginal revenue equals marginal cost. In the short run, firms can experience abnormal profits, no profits/losses, or losses, and in long run equilibrium all firms earn only normal profits.

1. PRESENTATION ON
PERFECT COMPETITION
MARKET

2. MEANING OF MARKET
• Goods and service
• Buyers and sellers
• A place or region
• Given price

3. Perfect Competition Market
Classification ofMarket
Markets Form
PerfectCompetition ImperfectCompetition
MonopolisticCompetition
Oligopoly
Duopoly
Monopoly

4. Meaning of Perfect CompetitionMarket
“AMarket situation in whichalargenumberof
producers or sellers producing andselling
homogeneousproduct.”

5. Main features of Perfect CompetitionMarket
• Each sellers sell a small portion total
• Single sellers has no influence on
market
• Sellers are price taker
• Identical product
• Same price and
cost
• There is no government or other
control
Large no. of
buyers and
sellers
Homogeneo
us product
Free entry
and exit

6. Main features of Perfect CompetitionMarket
• Perfect knowledge about the prevailing
price.
Perfect
knowledge
about market
• Large no. of firm, so no transport or
selling cost
• Homogeneous product, so no advt.
needed
Absents of
selling cost
and Advt. cost
• Price is determined in the
industry .
A single price
of product
Example: Agricultural products

7. Meaning of Perfect CompetitionMarket
Nature of demand andAR, MRCurve of a firm
Output Price TR AR MR
1 1
0
2 1
0
3 1
0
4 1
0
5 1
0
6 1
0
7 1
0
8 1
0
Price
Output
Price=AR=MR
Demand andAR,MR Curveof a firm
Out put Price TR AR MR
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
6 10 60 10 10
7 10 70 10 10
8 10 80 10 10

8. Meaning of Perfect CompetitionMarket
Price determination in theindustry
Price
Output
DemandCurve
Supply Curve
Excess supply
Excess Demand

9. Meaning of Perfect CompetitionMarket
Price determination in theindustry
Price
Price=AR=MR
Firm( is a PriceTaker)
Price
Industry
DemandCurve
Supply Curve
Output Output
First Condition for maximization of profit > MR= MC
Second Condition for maximization of profit > MC curve cut MR curve
from bellow

10. Meaning of Perfect CompetitionMarket
Price determination in theindustry
Price
Output
Price=AR=MR
Firm( is a PriceTaker)
Price
Output
Demand
Curve
Industry
Supply Curve
What is level of
output of a firm
?
First Condition for maximization of profit is MR= MC
Second Condition for maximization of profit is MC curve cut MR curve
from bellow

11. Meaning of Perfect CompetitionMarket
Thefirms equilibrium(Out putdetermination)
Price
Output
Price=AR=MR
Firm( is a PriceTaker)
Price
Output
Industry
DemandCurve
Supply Curve
MC
O M
MC=MR
E
E0
First Condition for maximization of profit is MR= MC
Second Condition for maximization of profit is MC curve cut MR curve
from bellow

12. Meaning of Perfect CompetitionMarket
Short run equilibrium of a firm with abnormalprofit
Price
Output
Price=AR=MR
FirmwithProfit
MC
O M
MC=MR
Profit E
AC

13. Meaning of Perfect CompetitionMarket
Short run equilibrium of a firm with No profit No Losses
Price
Output
Price=AR=MR
FirmwithProfit
MC
O M
MC=MR
E
AC

14. Meaning of Perfect CompetitionMarket
Short run equilibrium of a firm withLosses
Price
Output
Price=AR=MR
FirmwithProfit
MC
O M
Losses
E
MC=MR
AC

15. Meaning of Perfect CompetitionMarket
Long run equilibrium of a firm with NormalProfit
Price
Output
Price=AR=MR
FirmwithProfit
LMC
O M
MC=MR
E
LAC

16. Thanks
Perfect CompetitionMarket