Economics: Perfect Competition, Elasticity of Supply, Negative Externalities
Added on 2023-06-07
10 Pages1414 Words178 Views
Running head: Economics 1
Economics
Name:
Institution:
Economics
Name:
Institution:
ECONOMICS
Introduction
1. The perfect market has an infinite number of competitors. This competition makes the
company focus on customer satisfaction as none of the companies can afford to lose its
customers. Every firm in the perfect market must ensure that its marginal costs equal the market
price to maximize profit (Azevedo & Gottlieb 2017). Example of a perfectly competitive market is
street food vendors. These markets have various characteristics; there is no barrier to market
entry and exit. Hence, a food vendor firm is free to enter or exit from the market anytime it
wishes. This will red will reduce any chance of existing firms gaining monopoly power.
There is also perfect knowledge about the products, costs, selling price and quality. The
street vendor firm makes sure that they have all the adequate information thus reducing the risk
level and losing its potential customers. Also perfect competitive don't have to advertise since
there is sufficient information hence, increasing their revenue Also, perfectly competitive
markets produce homogenous products. In other words, products are usually not branded (Bagwe,
& Staiger 2015). In a case of a street food vendor, they prepare foods that are the same but to make
sure you maintain your customers you have to make sure the food is adjusted according to your
customer's tastes and preferences. Lastly, no single seller or buyer can influence the market firms
in a perfectly competitive market are not price makers instead they are price takers, they are
forced to set price in accordance to the existing market price.
2. Price of elasticity of supply is calculated by dividing the % change in quantity supplied
by %change at a price.
Australian Statistics for rice
Years Production(Q) Price(P)
2007-08 8.5 415
Introduction
1. The perfect market has an infinite number of competitors. This competition makes the
company focus on customer satisfaction as none of the companies can afford to lose its
customers. Every firm in the perfect market must ensure that its marginal costs equal the market
price to maximize profit (Azevedo & Gottlieb 2017). Example of a perfectly competitive market is
street food vendors. These markets have various characteristics; there is no barrier to market
entry and exit. Hence, a food vendor firm is free to enter or exit from the market anytime it
wishes. This will red will reduce any chance of existing firms gaining monopoly power.
There is also perfect knowledge about the products, costs, selling price and quality. The
street vendor firm makes sure that they have all the adequate information thus reducing the risk
level and losing its potential customers. Also perfect competitive don't have to advertise since
there is sufficient information hence, increasing their revenue Also, perfectly competitive
markets produce homogenous products. In other words, products are usually not branded (Bagwe,
& Staiger 2015). In a case of a street food vendor, they prepare foods that are the same but to make
sure you maintain your customers you have to make sure the food is adjusted according to your
customer's tastes and preferences. Lastly, no single seller or buyer can influence the market firms
in a perfectly competitive market are not price makers instead they are price takers, they are
forced to set price in accordance to the existing market price.
2. Price of elasticity of supply is calculated by dividing the % change in quantity supplied
by %change at a price.
Australian Statistics for rice
Years Production(Q) Price(P)
2007-08 8.5 415
ECONOMICS
2008-09 8.5 566
2009-10 10.4 457
2010-11 9.5 246
2011-12 8.9 270
2012-13 10.3 260
2013-14 10.9 340
2014-15 9.9 395
2015-16 10.3 419
2016-17 9.9 350
Year 2007-08= 151\415*0.2/-0.2=0.4
Year 2008-09=-109\566*8.5/1.9=-1.0
Year2009-10= -217/457*10.4/-0.9=5
Year 2010-11=30/340*-9.5/-0.6=-1
Year2011-12=-10/270*8.9/1.4=0
Year2012-13=80/260*10.3/0.6=3
Year 2013-14=55/340*10.9/-1=-2
Year 2014-15=24/395*9.9/0.1=0
Year2015-2016=59/419*0/0.2=0
Year 2016-17=59/419*0/0.2=0
Years Elasticities
2008-09 8.5 566
2009-10 10.4 457
2010-11 9.5 246
2011-12 8.9 270
2012-13 10.3 260
2013-14 10.9 340
2014-15 9.9 395
2015-16 10.3 419
2016-17 9.9 350
Year 2007-08= 151\415*0.2/-0.2=0.4
Year 2008-09=-109\566*8.5/1.9=-1.0
Year2009-10= -217/457*10.4/-0.9=5
Year 2010-11=30/340*-9.5/-0.6=-1
Year2011-12=-10/270*8.9/1.4=0
Year2012-13=80/260*10.3/0.6=3
Year 2013-14=55/340*10.9/-1=-2
Year 2014-15=24/395*9.9/0.1=0
Year2015-2016=59/419*0/0.2=0
Year 2016-17=59/419*0/0.2=0
Years Elasticities
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