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What is perfect competition? Explain how price is determined under perfect competition

 

What is perfect competition? 

In economic theory, perfect competition occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices.

Perfect competition is a theoretical market structure in which several conditions are met:

  • There are many buyers and sellers in the market, and no single buyer or seller has any significant influence over the market price.
  • The goods or services offered by all the firms in the market are identical or at least very similar.
  • There are no barriers to entry or exit for firms in the market, so new firms can easily enter the market and existing firms can easily exit.
  • All buyers and sellers have full information about the prices and qualities of goods and services in the market.

In a perfectly competitive market, firms are price takers and have to accept the market price, but they can sell as much as they want. The firms are also motivated by profit-maximizing and will set the quantity where marginal cost equals the marginal revenue.

It is important to note that perfect competition is a theoretical concept and that in the real world, markets may approximate but not fully meet these conditions.


Explain how price is determined under perfect competition

In a perfectly competitive market, there are many buyers and sellers, and no single buyer or seller has any significant influence over the market price. Prices are determined by the intersection of the supply and demand curves. As the price of a good increase, the quantity supplied by firms will also increase, but the quantity demanded by consumers will decrease.

Conversely, as the price of a good decrease, the quantity supplied by firms will decrease, but the quantity demanded by consumers will increase. The market price will settle at the point where the quantity supplied equals the quantity demanded, which is called the equilibrium price. At this price, firms are able to sell all of their output and consumers are able to buy all the goods they want.

'Acharya Ramchandra Shukla' was born in 1884 in a village named Agona in Basti district, Uttar Pradesh, India. His father Pt. Chandrawali Shukla was a Sarayuparin Brahmin. He was a supervisor Kanungo and biased of Urdu. Shuklji had studied till the Intermediate. After this, he did the job. Then he left the job and became a teacher. He started writing in Hindi from his student life. Impressed by Shuklaji's ability, Nagari Pracharini Sabha, Kashi called him to work in the Hindi literature. Shuklaji was appointed Hindi teacher in Hindu University and later became the Head of Hindi Department. He died in 1941 AD. Following are the major compositions of Acharya Ramchandra Shukla- 'Charan Vinod', 'Radhakrishna Das', 'Chintamani Triveni', 'Surdas', 'Ras Mimamsa', 'History of Hindi literature' etc. He edited 'Bhramar Geetasar', 'Bharatendu Sahitya', 'Tulsi Granthavali' and 'Jayasi Granthavali'. The talent of Acharya Ramchandra Shukla Ji was multi-faceted. He was a great essayist, critic and thinker. He is considered the first basic critic of Hindi. His history of Hindi literature is considered to be superior in history. Acharya Ramchandra Shukla was the pride of Hindi. Full name of 'Dr. A.P.J. Abdul Kalam' was 'Dr. Avul Pakir Jainulabdeen Abdul Kalam'. He was born on October 15, 1931 at Dhanushkothi in the temple town Rameshwaram in Tamil Nadu. He was born in a poor family, but he was an exceptionally brilliant child. Kalam passed the B.Sc. examination from Saint Joseph College, Thiruchirapalli. He joined Madras Institute of Technology (MIT). His further knowledge in the field got upgraded when he joined Defense Research and Development Organization (DRDO) in 1958 and Indian Space Research Organization (ISRO) in 1963. He is known as the Missile Man of India. The various Indian Missiles of world order like Prithvi, Trishul, Akash, Agni, etc. are mainly the result of his efforts and caliber. Dr. A.P.J. Abdul Kalam became the 11th President of India. He served the country from 2002 to 2007. For his excellence and brilliance, he was awarded the prestigious Bharat Ratna in 1998; Padma Vibhushan in 1990; and Padma Bhushan in 1981. Dr Kalam expired on Monday 27 July 2015. He suddenly fell unconscious when he was delivering a lecture at the Indian Institute of Management at Shillong. On 30 July 2015, the former President was laid to rest at Rameswaram's Pei Karumbu Ground with full state honours. Over 350,000 people attended the last rites, including the Prime Minister, the governor of Tamil Nadu and the chief ministers of Karnataka, Kerala and Andhra Pradesh. Dr. A.P.J. Abdul Kalam was mainly interested in work. He was a bachelor. He was not interested in going abroad. He wanted to serve his motherland first. He said that he thinks his first and foremost duty is to serve his motherland. He was fond of music and the Koran and the Gita. Ever since becoming the head of the Indian State, he had been having interaction with children all over the country. He was by no means a miracle man. His advice to the youngster of the nation was to "dream dream and convert these into thoughts and later into actions".
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