Perfect Competition

cdsmith123
Mind Map by , created over 6 years ago

A-Levels Economics Mind Map on Perfect Competition, created by cdsmith123 on 05/25/2013.

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cdsmith123
Created by cdsmith123 over 6 years ago
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Perfect Competition
1 ASSUMPTIONS
1.1 LARGE NUMBER OF BUYERS+SELLERS - NO INDIVIDUAL CAN ALTER THE MARKET PRICE
1.2 PERFECT INFORMATION OF ALL PRODUCTS
1.3 EQUAL ACCESS TO TECHNOLOGY
1.4 HOMOGENEOUS PRODUCTS
1.5 NO BARRIERS TO ENTRY OR EXIT
1.6 PERFECTLY MOBILE FACTORS OF PRODUCTION
2 LONG RUN = profits cannot be made
2.1 firm would be competed away
2.1.1 produce at market clearing price
2.1.1.1 ATC=MC
3 SHORT RUN = If ATC is below market clearing price
3.1 Abnormal profits made
3.1.1 signals to other firms to enter market
3.1.1.1 supply increase = price set below market clearing = ATC=MC
4 LONG RUN = firms statically efficient
4.1 both productively + allocatively efficient at the same time
4.1.1 Firms being making losses
4.1.1.1 supply reduces
4.1.1.1.1 price increases

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