Lecture 16 Date : 26-Sep-2022 % Chapters for Test- 1: Market forces of Supply and Demand (ch 4) 2. Elasticity and its application (ch ) 3. Supply, Demand and government policies (ch 6) h. Consumers, Producers and He Efficienuy of Markets Cch7) 5. Te Goets of Production (ch 18) 6 Firms in Competitive Market (Ch IX) 4 The theory of consumer choice (Ch 21) * Perfect Competition * Consider a perfectly competitive markek Market demand is P= 10-4Q_ and Markel supply & P= Qs Denoting firm level quantity by 2 Assume tha TC = 60 + 42 422° ‘SOU Haak eet AGEs FEAG Q a) What is the market equilibrium price and qyantity 4) How many firms ave in He __industry <) Do firms make a profit or loss ? —> P= Q5= Qp——> for intersection pont at _ equilibrium, SP= loo R= [20 Qo* Qs [20b) Pe Me Bos AFA2 “ 2 4 quontity per fire No. of firms, S to get torah qpankity 20 ate. 6) Revenue = 2ox4= 80 Total (ost = SO+ Aly) t2d4)* e SO 416 4) 32. 2 Gmpany suffers a lose of [18 tlh the long run, because of He free entry and exit nature He markel, firms who are making losses will leave fe. market ’ 4 = Because a He adjustments, in the long run, Hae market will be in equilibrium when tha firms baying inthe business. wil make _2ero profit firm is earning profit equal to the imphiit/ opportuniby cost . Feonomje costs / Accounting costs + includes opportuni co wes