EFFECT OF CHANGE IN PRICE ON OUTPUT IN

PERFECT COMPETITION

PRESENTED BY—JALAJ MANI (12BSP0948)RAHUL SADANA (12BSP0509)

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

CLASSIFICATION OF MARKETS

Perfect Competition Imperfect Competition 1. Monopolistic Competition 2. Pure Oligopoly 3. Differentiated OligopolyMonopoly

PERFECT COMPETITION.. .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.

PERFECT COMPETITION.. .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.

PERFECT COMPETITION.. .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.

PERFECT COMPETITION.. .

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

EFFECT OF PRICE ON OUTPUT• 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.

CONCLUSION

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.