![]() Also, firms are the price-takers and the industry is the price-maker. The price at this level is the equilibrium price and the quantity is the equilibrium quantity.Īll firms receive this price in a perfectly competitive market. The market demand curve is DD and the market supply curve is SS.įurther, the point at which the market’s demand and supply curves intersect each other is the equilibrium point. The left side of the figure represents the industry and the right side the case of a firm. In the figure above, Price is on the Y-axis and Quantity on the X-axis. In perfect competition, the equilibrium of the market’s demand and supply determines the price. Let’s derive the firm’s demand curve with the help of the market’s demand and supply curve.
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