Economics (Pre-Masters)

Week 4 Lecture 1: Market Structures 1 – Perfect Competition

Learning outcomes
Week’s Learning Outcomes:

By the end of this week, you will be able to:

- Define perfect competition and monopoly

- Examine the merits and demerits of perfect competition to consumers

and business organisations respectively

- Examine the merits and demerits of monopoly to consumers and

business organisations respectively

- Use graphs to illustrate the concept of perfect competition and monopoly

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A: PERFECT COMPETITION

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EMPHASIS

• What is perfect competition? What are the features?

• What is abnormal profit? What gives rise to abnormal profit?

• What is normal profit? What gives rise to normal profit?

• What are the limitations of Perfect Competition? Evaluating the assumptions

• Economic efficiency under perfect competition – short run vs long run (profit
maximisation, allocative efficiency and productive efficiency) (slides 38 to 50)

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ABBREVIATIONS / TERMINOLOGY

• MC • SUPERNORMAL PROFIT

• MR • NORMAL PROFIT

• AC • SHORT RUN EQUILIBRIUM

• AR • LONG RUN EQUILIBRIUM

• MARKET DEMAND • ALLOCATIVE EFFICIENCY

• MARKET SUPPLY • PRODUCTIVE EFFICIENCY

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PERFECT COMPETITION – INTERNET REFERENCE I

• https://www.slideshare.net/tutor2u/perfect-competition-56822765

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B: PERFECT COMPETITION 2

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PERFECT COMPETITION – INTERNET REFERENCE 2

• https://www.slideshare.net/sureshmaya/perfect-competition-15061132

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C: PERFECT COMPETITION 3

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PERFECT COMPETITION – INTERNET REFERENCE 3

• https://www.slideshare.net/ashushreshta/perfect-competition-42249345

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D: LECTURE 1 ACTIVITIES

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QUESTIONS:

• QUESTION 1:

• Explain the condition under which profit maximisation is achieved in perfect

competition. Consider both Short Run and Long Run.

• QUESTION 2:

• Explain the condition under which allocative efficiency is achieved in perfect

competition. Consider both Short Run and Long Run.

• QUESTION 3:

• Explain the condition under which productive efficiency is achieved in perfect

competition. Consider both Short Run and Long Run.

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Thank you