Managerial

Economics
Perfect Competition
[Meeting 9]
Jonathan Gultom
comparing market structures
 discussion..
• What are the different between those three?
• Where is Indonesia positioned?

• Give examples of each

• Which one better?
 the basics of supply and demand
In a perfectly
competitive
market, price is
determined by the
market demand
and supply
curves.

Remember
invisible hand?
exercise
Shifts in Demand and Supply
 competitive equilibrium
Perfect competition is commonly characterized by
some conditions.
• A large number of firms and consumers.
• There are no barriers with respect to new firms
entering the market.
• All firms produce and sell identical standardized
products.
• All consumers have perfect information about
competing prices
• Firms and consumers are price takers
 decisions of the competitive firm
The key feature of the perfectly competitive firm
• Price taker
• the firms’ outputs are perfect substitutes for one
another
• perfectly elastic demand
 optimal output

Explain the different..

equilibrium
 market efficiency
Competitive markets provide efficient amounts of
goods and services at minimum cost to the
consumers who are most willing (and able) to pay
for them.
 discuss
Do you agree?
 one buyer one seller
Daycare business
• Willingness to buy
$8
• Willingness to sell
$4
market
a competitive day-care market
 international trade
• Quotas
tariffs
 discussion..
• Should government limit the rice import?