EC260 Lecture Notes - Lecture 5: Perfect Competition, Market Power, Marginal Revenue
Document Summary
Market structure affects pricing power of firm so we define markets based on degree of pricing power. Perfectly competitive market: managers have no market power. Monopoly: managers face no competition = lots of market power. Market structure determined by a number of factors: number of firms present, type of product being sold, pricing power of firm, barriers to entry, nonprice competition. Public utilities: market price in perfect competition and the impact of supply and demand shifts. Perfectly competitive market = many producers with no influence over price of product. Every product is similar to the other ones in the market; barriers to entry are low. 2. 1 how market price is determined in perfect competition. Perfect competition market price determined by intersection of supply and demand. Market supply curve: total amount that individual suppliers of good are willing to sell at each price. Market demand curve: total amount that individual buyers are willing to buy at each price.