Economics 1021A/B Lecture 17: Perfect Competition

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Nicholas Kahnert

Document Summary

Economics1021 lecture 017 chapter 12 perfect competition. No restrictions to entry into the industry. Establish firms have no advantages over new ones. Sellers and buyers are well informed about prices. Firm"s min efficient scale is small relative to the market demand, so there is room for many firms in the market: min efficient scale: the lowest point on the lrac. Each firm is perceived to produce a good / service, has no unique characteristics, so consumers don"t care which firm"s good they buy. Price takers: each firm is a price taker. Price taker: a firm that cannot influence the price of a good or service. No single firm can influence the price it must take the equilibrium market price. Each firm"s output is a perfect substitute for the output of the other firms, so the demand for each firm"s output is perfectly elastic: (if price changes, they will lose all their customers)