ECON 1B03 Lecture Notes - Lecture 28: Perfect Competition
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ECON 1B03 Full Course Notes
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Suppose that a market is initially in lr eqm, so that in sr, p = mc = min atc. Now suppose there"s an increase in demand in market. If industry output increases, demand for inputs will increase. Input sellers may increase their input prices, thus raising costs of production of final. An increase in p is required to increase market quantity supplied. Market supply curve will be upward sloping. If input prices don"t increase as market output increases, firms" costs will not change. Their min lrac will not change regardless of how much they produce. Long run market supply will be a horizontal line at min lrac = lr equilibrium p. Freson ltd is a small firm in california that grows oranges in a perfectly competitive market. Let p = price, in $, of a crate of oranges. Let q = qty of crates, in thousands. Qd = 100 - p is market demand.