Lesson 2: perfect market – introduction to perfect competition

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Lesson 2: perfect market – introduction to perfect competition

GRADE 11 ECONS

A bowl of oranges

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LESSON OUTCOMES

BY THE END OF THIS LESSON, YOU SHOULD BE ABLE TO: DEFINE A PERFECT MARKET LIST AND DISCUSS THE CHARACTERISTICS OF A PERFECT MARKET EXPLAIN AND ILLUSTRATE HOW PRICES ARE DETERMINED IN THIS FIRM EXPLAIN THE KINDS OF PROFITS MADE

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WHAT IS A PERFECT MARKET?

This market is characterised by many businesses which have no control or influence over price.    Sellers in this market structure are known as ‘price takers’ as they have no influence over prices.

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This Photo by Unknown Author is licensed under CC BY

This Photo by Unknown Author is licensed under CC BY

Simple Examples That Help Us Understand Perfect Competition - Business Zeal

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CHARACTERISTICS OF PERFECT COMPETITON

Perfect And Imperfect Competition - Lessons - Blendspace

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PRICE DETERMINATION IN PERFECT COMPETITION

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KINDS OF PROFIT

KEY NOTES ECONOMIC PROFITS ARE ONLY MADE IN THE SHORT RUN. NORMAL PROFITS ARE MADE IN THE LONG RUN. ECONOMIC LOSS IS MADE IN SHORT RUN

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SUMMARY

PERFECTLY COMPETITIVE FIRMS ARE VERY DOMINANT IN THE MARKET AS THEY SELL IDENTICAL PRODUCTS. THINK OF THE STREET VENDORS. HOW MANY OF THEM ARE SELLING TOMATOES? MY POINT EXACTLY. THESE FIRMS CAN SELL AS MUCH AS THEY LIKE BUT THEY CANNOT CHARGE THEIR OWN PRICE AS THEY HAVE NO POWER TO DO SO. AS A BUYER YOU KNOW ABOUT THE GOODS AND SERVICES OFFERED IN THE MARKET AND HOW MUCH THEY COST.

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This Photo by Unknown Author is licensed under CC BY-SA-NC

This Photo by Unknown Author is licensed under CC BY-SA-NC