savio13
Savio Cabral
1.Role of an individual: An individual produce or consumer cannot influence the price in a perfectly competitive market. In a highly competitive market, in the real situation, both the seller and buyer have to accept the price that is determined in the market by demand and supply forces.
2. Equilibrium Conditions: A producer has to follow certain rules determine his output. An additional output involves additional cost, that is, marginal cost(MC). Similarly the sale of additional unit brings additional revenue, that is, marginal revenue(MR). A rational producer has to compare the cost and revenue while producing output. He has to stop the production where the additional cost is equal to additional revenue that is MC=MR. Producing more than that quantity requires incurring more cost which has to be avoided. Producing less than the equilibrium output means giving up revenue which is greater than the cost. Thus the equilibrium conditions derived in the perfect competition model is applicable to all market situations.
2. Equilibrium Conditions: A producer has to follow certain rules determine his output. An additional output involves additional cost, that is, marginal cost(MC). Similarly the sale of additional unit brings additional revenue, that is, marginal revenue(MR). A rational producer has to compare the cost and revenue while producing output. He has to stop the production where the additional cost is equal to additional revenue that is MC=MR. Producing more than that quantity requires incurring more cost which has to be avoided. Producing less than the equilibrium output means giving up revenue which is greater than the cost. Thus the equilibrium conditions derived in the perfect competition model is applicable to all market situations.