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    Market and Its Equilbrium

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    4058AMAN ANAND
    The document discusses different types of markets including perfect competition and monopoly. It provides characteristics and equilibrium conditions for perfect competition in both the short run and long run. It also discusses monopoly markets and provides characteristics and equilibrium conditions for monopolies. The document includes numerical problems related to these market structures.

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    Market and Its Equilbrium

    Uploaded by

    4058AMAN ANAND
    11 views14 pages
    The document discusses different types of markets including perfect competition and monopoly. It provides characteristics and equilibrium conditions for perfect competition in both the short run and long run. It also discusses monopoly markets and provides characteristics and equilibrium conditions for monopolies. The document includes numerical problems related to these market structures.

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    Market and its equilbrium

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    The document discusses different types of markets including perfect competition and monopoly. It provides characteristics and equilibrium conditions for perfect competition in both the short run and long run. It also discusses monopoly markets and provides characteristics and equilibrium conditions for monopolies. The document includes numerical problems related to these market structures.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    11 views14 pages

    Market and Its Equilbrium

    Uploaded by

    4058AMAN ANAND
    The document discusses different types of markets including perfect competition and monopoly. It provides characteristics and equilibrium conditions for perfect competition in both the short run and long run. It also discusses monopoly markets and provides characteristics and equilibrium conditions for monopolies. The document includes numerical problems related to these market structures.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 14

    TYPES OF MARKET

    AND ITS EQUILIBRIUM


    PERFECT COMPETITION: Its main features are:
    i. There are large numbers of buyers and sellers. So no
    single seller can influence the market price with his
    own individual action.
    ii. All the sellers sell identical/homogeneous products.
    iii. There is free entry and exit of firms in and out of the
    industry in the long run.
    iv. There is no interdependence among the firms.
    v. There exists perfect knowledge among the buyers and
    sellers about the price prevailing in the market.
    vi. In such type of market once the price is determined by
    the equilibrium of the industry’s demand and supply, it
    will have no tendency to change.
    Say the determined price is Rs.5 per unit. Complete the
    following schedule.
    EQUILIBRIUM /PROFIT MAXIMISING CONDITION

    i. MC=MR
    ii. the slope of MR < slope of MC
    SHORT RUN EQUILIBRIUM UNDER PERFECT
    COMPETITION:

    • differential cost condition which determines


    their profit and losses.
    • The most efficient firm will have the lowest
    average cost of production and vice versa.
    LONG RUN EQUILIBRIUM UNDER PERFECT COMPETITION:

    • In the long run, all the firms under perfect


    competition will only earn normal profit.
    • If there is any deviation from this normal it will
    create condition will reverse the price back to
    equilibrium.
    NUMERICALS:

    Q1. Total cost => TC =5Q


    Demand function => Q = 53 –P
    Find the output (Q) at the point of maximum profit.

    Q2. A firm has the Total revenue function given as R=200q – 0.01q2 and
    Total cost function given as TC = 50q + 20,000. Obtain the output at the point
    of maximum profit as well as find the amount of profit at this point.
    Q3. If the Total cost function is given as C=⅓(q3) – 2.5q2 +6q
    +10 .
    Determine the shut-down point of the firm.

    Q4. A firm operating under Perfect competition faces


    the following Total cost function.
    TC = 6000 +400Q -20Q2 +Q3
    (i) What is the lowest price at which the firm will
    shut-down in the short run?
    (ii)If the market price is $310, should the firm
    continue production?
    Q5. Find the profit maximising output(X) by (i) Profit
    approach and (ii) MC=MR equality approach.

    The demand and cost functions are given as follows.

    Demand function: X=200 – 10P

    Cost function: C=10X +(X2/25)


    MONOPOLY MARKET

    • Characteristics of Monopoly market:


    i. There is a single seller or producer of the product in the
    market.
    ii. The product sold by the monopolist has no close
    substitutes, which means its cross elasticity with the
    product of other sellers will be very low.
    iii. There are strong barriers to the entry of new firms into the
    industry.
    iv.Demand Curve (AR) and Marginal revenue (MR) curve of a
    monopolist:
    5. No definite supply curve:

    A monopolist will have no definite supply curve


    because he can sell the same quantity at different
    prices or can charge the same price for different
    quantities sold depending on the elasticity of the
    demand curve.
    6. Price Discrimation:
    The practice of the monopolist to vary his price according to
    the elasticity of the market is known as Price Discrimination
    by a monopolist.

    SHORT RUN EQUILIBRIUM OF A MONOPOLIST:


    Equilibrium is at the point where MC=MR.
    Monopoly price it is greater than MC.
    If the monopolist knows the MC of his product and the value
    of price Elasticity (e) at or near the equilibrium output, he
    can easily calculate the price at which he can maximise his
    profit.

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