PRICE AND OUTPUT DETERMINATION
UNDER PERFECT COMPETITION
The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market.
Meaning of Market. — A market is a set of conditions in which buyers and sellers meet each other for the purpose of exchange of goods and services for money. The essentials of a market are (1) presence of goods and services to be exchanged (2) the existence of one or more buyers and sellers (3) a place or a region where buyers and sellers of a good get in close touch with each other.
Classification of Markets.
Markets are classified according to the number of firms in the market and by the commodity to be exchanged. The economists on the basis of variation in the features of market describe four market models: (1) Perfect Competition (2) Pure Monopoly (3) Monopolistic Competition and (4) Oligopoly. In the analysis of each market model, it is examined as to what determines the equilibrium price, output and profit levels for the individual firm and for the industry. In this chapter, we discuss the most important of the various market models that is perfect competition.
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