Chapter-Forms of Market and Its Equilibrium Micro Economics class 11 in english Medium CBSE Notes

Perfect competition :

• There is a perfect degree of competition and single price prevails.
• It is the type of market where there is complete absence of rivalry.
• Perfectly competitive market refers to a market situation in which there are large number of buyers and sellers, sellers, selling homogeneous goods at prevailing price.
• It is Characterized by complete absence of rivalry among firms.
• perfect competition market is also known as price taker (as it accepts the prices fixed by the industry).

Features of perfect competition market :

(a) lage number of buyers and sellers - Due to this feature, neither the buyer, nor the seller can Influence the price of the product. the demand for its product is perfectly elastic.

(b) Homogeneous products - The goods supplied by different firms are perfect substitutes of each other.

(c) Full knowledge of market - The buyers and sellers are assumed to have perfect and full knowledge of the prevailing price of the product. this helps them to take maximum benefit from the market.

(d) Economic Rationality - This market assumes that buyers and sellers are rational and will buy and sell as per their economic interest.

(e) No transportation cost - since the products of the firms are homogeneous and sell at uniform as their economic interest.

(f) Free entry and exit of firms - In this market there is not technical or legal barrier for the new firms to enter. The choice of entering or leaving an industry lies on individual firms.

Equilibrium of the firm under perfect compectition:

A firm is said to be in equilibrium when its profit are maximum, which depends upon cost and revenue of the firm:

A firm will be in eduilibrium in the short run based on two approaches.

(a) TC - TR approach

(b) MC - MR approach.

Note:- Both these approaches have been already discussed in the previous chapter.

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