Perfect Competition: Demand and Supply Analysis

The quantity demanded reduces as the price increases. This implies that the demand curve (DD’) slopes downward.

The supply of a product increases at high price and decreases at low price. Therefore, the supply curve (SS’) slopes upward.

When the price is above the equilibrium price, supply is more than demand, and prices will fall to reach equilibrium.

<p>A firm is in equilibrium when it is earning maximum profit, and it has to accept the price determined by the industry. The firm is a price taker, not a price maker.</p> Signup and view all the answers

<p>Equilibrium is the point at which the quantity demanded equals the quantity supplied. It is identified in a graph where the demand curve intersects the supply curve.</p> Signup and view all the answers

<p>The demand curve slopes downward, while the supply curve slopes upward. The interaction between the two curves determines the market price and quantity.</p> Signup and view all the answers

<p>The firm does not need to invest in advertising or sales promotion because buyers are already informed about the product, keeping the price of their products low.</p> Signup and view all the answers

<p>The seller would lose their customers immediately.</p> Signup and view all the answers

<p>It allows factors like labor, raw materials, and capital to move freely, enabling firms to respond to changes in market demand and supply.</p> Signup and view all the answers

<p>Economic factors.</p> Signup and view all the answers

<p>It allows firms to enter or exit the market in response to changes in market demand and supply, maintaining equilibrium.</p> Signup and view all the answers

<p>Perfect knowledge among buyers and sellers enables them to make informed decisions, leading to a price that reflects the true market value of the product.</p> Signup and view all the answers

<p>A horizontal straight line, parallel to the X-axis.</p> Signup and view all the answers

<p>It represents the equilibrium point, where the equilibrium price and equilibrium quantity are determined.</p> Signup and view all the answers

<p>When marginal cost (MC) is equal to marginal revenue (MR), and the MC curve cuts the MR curve from below.</p> Signup and view all the answers

<p>Because additional output adds more revenue than costs and increases its profits.</p> Signup and view all the answers

<p>The marginal revenue curve coincides with the average revenue curve.</p> Signup and view all the answers

<p>It determines the equilibrium price and quantity, and acts as a signal for firms to adjust their output to maximize profits.</p> Signup and view all the answers