Mar 24, 2016

ECO 1013: CLASS REFLECTION WEEK 10

Assalamualaikum sekalian 
Cuti seminggu tu kann, kitorg tk jalan2 pun. Duk terperap dlm rumah je siapkan assignment. 
We want to cry 
Soo kita dh masuk week 10 
Kita masuk chapter yang terakhir which is 
CHAPTER 4 : MARKET STRUCTURE 

MARKET STRUCTURE
 Market  a place where buyer and seller meets to transact business
 Market Structure  number and distribution size of buyer and seller  in the market.

PROFIT MAXIMIZATION IN PERFECT COMPETITION MARKET
 Market equilibrium is achieved when marginal cost, MC equals to marginal revenue, MR 
MC = MR 
 Prices are fixed in perfect competition, marginal revenue, MR is the same as at price, P.
P = AR = MR

PROFIT MAXIMIZATION IN IMPERFECT COMPETITION MARKET
 Example  monopolistic competition, monopoly and oligopoly
 Market Equilibrium is achieved when 
MR = MC
 Price is different based on quantity supplied.
P = AR
 Short run firm will enjoy three type of profit :
           Supernormal profit profit earned when total revenue, TR is greater than total cost, TC
TR > TC
 it is also when price greater than average total cost
P > ATC

           Subnormal profit losses because price is lower than average cost 
P < AC
 Average total cost less than total cost 
ATC < TC

          Normal profit  breakeven price is profit necessary for firm to stay in the business
 It is when total revenue equal to total cost and no profit or loss incurred.
TR = TC

PERFECT COMPETITION MARKET
 Definition  where many buyer and seller sell homogenous product but cannot control the price. 
 Characteristics 
          Large number of buyers Buyers are price takers. Price is fixed through the forces of demand and supply.
          Many seller in the market Sellers are price takers. Action of one firm will affect the other firm. 
          Product are homogenous  Product are same and not differentiated. Advertising is absent in this market.
         Free entry to enter or to exit market  New firm will enter the market . Some firm will leave market. No restriction is imposed.
         Perfect knowledge Know current prices of product. Know the market situation.

 Short run profit in perfect competition market

        Supernormal profit in perfect competition market

         Normal profit in perfect competition 


          Subnormal profit in perfect competition



 P/S: Ni video extra on perfect competition.
                           
                                      

Thanks for watching !

 
Up and Away