Assignment 1: Analyzing the Demand Side of a Perfectly Competitive Market

Assignment 1

(a) Explain why only the demand side of the ‘market’ covered in this case study could be
seen as perfectly competitive and why the case study suggests that the demand curve is
downward sloping. What assumptions underlying the supply side of the market are
violated in the study?
The perfectly competitive market in the given scenario can be defined as the options that are
available with respect to the transportation that is available in comparison to the bridge that was
constructed to ease the flow of the traffic and facilitate the market condition between places.
There are various options available to cover the distance with the people such as the trains, ferry
and by road. The demand side of the market covered could be seen as perfectly competitive as
they are ready to move to different available option to cover the distance depending upon the
price of the transport (Long, 2018). There is a tough competition between the transport available
as it can be seen that more than I million passengers used the train transport since the service was
started to provide in July. It can be seen that the demand curve is downward sloping because of
the decrease in the demand for a flow of vehicles that used to cross the bridge. There was a flow
of 20000 vehicles per day but it dipped to only 6000 vehicles after peak summer season. The
price is an important factor for the demand of the product and services that are being offered. In
the current scenario, the prices of the tariff to cross the bridge was kept too high which
demotivated the traveler to use the bridge instead of the other transportation.

(Figure – Effect of price on the demand curve)
(Source – Dhaka, VSkills)
There is an inverse relation with the price of the demand which leads to people use of other
transportations (Petryni, 2018). The transportation is the basic need and keeping the price of the
same at higher side made the people think to even use it which were also opposed by the
business person and employees. The government overlooked the basic concept of the demand
and price. The assumption of facilitating the distance would be preferred even at a higher cost
didn’t work for the government. There was a continuous decrease in the usage of the bridge. The
government must have analysed the fact that the price is an important and critical factor
especially when it is a daily need and other options are also available.

References
 Dhaka, K., 2015. Does every demand curve slope downward? Vskills. [Online]. Also
available at https://www.vskills.in/certification/blog/do-all-demand-curves-slope-
downward/. [Accessed on 13-03-2018]
 Petryni, M., 2018. Relationship Between Level of Prices and Demand. Chron. [Online].
Also available at http://smallbusiness.chron.com/relationship-between-level-prices-
demand-24576.html. [Accessed on 13-03-2018]
 Long, N., 2018. What Considerations Do Perfectly Competitive Firms Make? Chron.
[Online]. Also available at http://smallbusiness.chron.com/considerations-perfectly-
competitive-firms-make-34100.html. [Accessed on 13-03-2018]S