Lecture 07 - ECO100 - ECO 100Y ECO 100Y Introduction to...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ECO 100Y ECO 100Y Introduction to Introduction to n m i n m i Economics Economics Lecture 7: Lecture 7: h t h t C titi C titi Short Short-Run Competitive Run Competitive Equilibrium Equilibrium Gustavo Indart Slide 1 Assumptions of Perfect Competition Assumptions of Perfect Competition There are many firms in the industry selling a omogeneous product homogeneous product There are many buyers There are no restriction to entry into the industry Firms already in the industry have no advantage over potential entrants Firms and buyers are completely informed about the ri f th pr d t f h firm in th ind tr Gustavo Indart Slide 2 prices of the products of each firm in the industry The Firms Demand Curve The Firms Demand Curve Since firms are price takers in a perfectly competitive market, they can sell any output at the given price g That is, since the output of any firm is too small lative to the industrys output, firms can sell any relative to the industry s output, firms can sell any output without affecting the market price Since firms receive the same fixed price for any level of output, perfectly competitive firms face a horizontal emand curve at the level of the market price demand curve at the level of the market price That is, competitive firms face a perfectly elastic d ( l t i i t Gustavo Indart Slide 3 demand curve (elasticity = ) dustry and Firm Demand Curves dustry and Firm Demand Curves Industry and Firm Demand Curves Industry and Firm Demand Curves Industry Firm P P S P 1 P 1 d D Gustavo Indart Slide 4 Q q Firms Are Price Takers Firms Are Price Takers Suppose that there are 1,000 firms of equal size producing a particular good Even if one firm were to double its output (which is a large increase for the firm), industry output would rise by only 1/1000 r 0 1 percent or 0.1 percent If, for instance, the industry price elasticity of demand were 0.5, If, for instance, the industry price elasticity of demand were 0....
View Full Document

This note was uploaded on 08/10/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Summer '09 term at University of Toronto- Toronto.

Page1 / 18

Lecture 07 - ECO100 - ECO 100Y ECO 100Y Introduction to...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online