ECO100Y5 Lecture Notes - Lecture 7: Perfect Competition, Market Power, Demand Curve
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ECO100Y5 Full Course Notes
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Market structure: all the features of a market that affect the behaviour and performance of firms in that market. Degree of product differentiation (pepsi v. coke) Firms have market power when they can influence the price of their product. Competitive markets: firms that have little or no market power. The more market power firms have, the less competitive is the market. Perfectly competitive markets: firms have zero market power. Many small wheat farmers; none of them can affect the price of wheat by supplying more or less. All firms sell a homogeneous (the same) product. Perfect information for consumers (they know the nature of the product being sold and the prices charged by each firm. Can alter output/sales and have no effect on prevailing market price. The demand curve for a perfectly competitive industry. This does not imply the firm can sell infinite quantity. Profit = tr (total revenue) - tc (total cost)