ECON 230D1 Chapter Notes - Chapter 8: Economic Equilibrium, Greek People'S Liberation Army, Market Power
1 May 2017
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Price taking: when a rm cannot signi cantly affect the market price for its output. Market is considered competitive if each rm is a price taker. The d curve is horizontal at the market price and is in nitely elastic. Conditions: large number of buyers and sellers: small size and a lot of buyers, no one can raise the p. the more rms, the less impact one has from its output. Identical products: if all the products are identical, it is dif cult for one rm to raise the p. Free exit means that rms are encouraged to enter a market in the rst place. Sometimes, not all conditions are met, but market is still competitive. Residual demand curve: the market demand that is not met by other sellers at any given price. D^r(p)=d(p) - s^0(p) with d(p) being qd and s(p) being supply curve of other rms.
