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Denzel Partnership PresentsDenzel Partnership Presents
Sushi 360ºSushi 360º
The Nature of Our The Nature of Our MarketMarket
Perfect competitionPerfect competition
Our competition is fierceOur competition is fierce
Advertising is uselessAdvertising is useless
All information is publicAll information is public
The Nature of Our The Nature of Our MarketMarket
Demand is extremely elasticDemand is extremely elastic
The large market reigns supreme over pricesThe large market reigns supreme over prices
Every product is substitutable with others in the Every product is substitutable with others in the marketmarket
EfficientEfficient
Easy entry and exitEasy entry and exit
GraphsGraphsImportant points Important points of perfect of perfect competitioncompetition
Quantity
Cost
P = MR= AR= D
Long run equilibrium in perfect competition
MC
AC
Qe 0
Long-run equilibrium (industry)
Price
Quantity
S
D
0
P
Q^ (industry)
Cost
Cost
QuantityQuantity
P = MR= AR= DP = MR= AR= D
MCMC
ACAC
Q1Q1
CC
P1P1
Firm in perfect competition making supernormal Firm in perfect competition making supernormal profitprofit
00
8
Pri
ce
Quantity
S1
D
P1
Q1
S2
P2
Q20
Cost
Quantity
P1
MC
AC
Q1
C
P1
P2
Q2
The impact on a market of supernormal
profit
0
Short-run losses
CostCost
QuantityQuantity
CC
PP
LossLoss
MCMCACAC
P=MR=AR=DP=MR=AR=D
Break-even price
Cost
Quantity
MCAC
P=MR=AR=D
Shut down point
Cost
Output
MC AC
P=MR=AR=D
AVCC
E
D
B
PA
P1
Q0
LossLoss
How We Determine CostHow We Determine Cost
Price is completely determined by the marketPrice is completely determined by the market
Price takers not price makersPrice takers not price makers
Costs must meet market priceCosts must meet market price
Variable: wages, suppliesVariable: wages, supplies
Fixed: rentFixed: rent
AdvantagesAdvantages
We can easily enter the market with little We can easily enter the market with little investmentinvestment
Necessity for efficiency keeps us competitiveNecessity for efficiency keeps us competitive
We have a huge market before usWe have a huge market before us
Free information can keep us innovativeFree information can keep us innovative
Safe and reliable investmentSafe and reliable investment
DisadvantagesDisadvantages
Stolen innovationStolen innovation
No control of the marketNo control of the market
Only way to improve is cost reductionOnly way to improve is cost reduction
SmallSmall
Returns not too impressiveReturns not too impressive
FarewellFarewell
Live long and prosper.Live long and prosper.