Class 12 Economics Index Terms Part I, Chapter 4: The Theory of the Firm Under Perfect Competition

Learn CBSE Economics Index Terms for Class 12, Part 1, Chapter 4 The Theory of the Firm Under Perfect Competition

1. Perfect Competition – Perfect competition is a situation in which each firm has the same ability to influence prices, and costs as other firms, by changing its price or output. Perfect competition is one in which there are many firms competing against each other, each of which produces identical products. In a perfectly competitive market, a firm must charge the same price as all of its rivals to eliminate any profit. A lack of barriers to entry means consumers can freely choose from among many suppliers, and prices are determined by the interaction between supply and demand.

Perfect competition is a fully competitive market of many producers and many buyers in which all firms follow the same price–cost equilibrium, that is, an industry in which there are no significant barriers to entry or exit.

In economics, there are three kinds of competition: perfect competition, imperfect competition, and monopolistic competition. An economy is said to be perfectly competitive if all producers in that economy have perfect information about prices and costs. Suppose that the whole world has four different firms, A, B, C, and D, each producing goods differently: firm A produces goods that cost Rupees 100, firm B produces goods that cost Rupees 110, firm C produces goods that cost Rupees 120 and firm D produces goods that cost Rupees 130. Now suppose that all of these firms have identical costs of production, but different prices or marginal costs (MC). For example, firm A’s output is 100 units at a price of Rupees 1 while their marginal cost is Rupees 1 (P = MC = 1), while firm B’s output is 110 units at a price of Rupees 2 while their marginal cost is Rupees 2 (P = MC = 2), firm C’s output is 120 units at a price of Rupees 3 while their marginal cost is Rupees 3 (P = MC = 3) and finally, firm D’s output is 130 units at a price of Rupees 4 while their marginal cost Rupees 4 (P = MC = 4).

2. Revenue, Profit – Revenue or profit is defined as the financial benefit received from an activity or service. If one sells products for Rupees 20 and makes a profit, then the revenue is Rupees 20.

Revenue is an income or gains from a business activity, often expressed in terms of a real number. In accounting, the revenue per unit time metric is the amount of money generated by an activity for which there is little to no consideration for any costs involved in producing or providing said activity.

Revenue is the income to which a business is entitled or entitled to get. It can be seen as a share or percentage of income or net profit that the business can expect to receive.

Revenue is the amount one gets for a product or service versus what it costs you to produce that item or provide your service. Revenue can be viewed as people spending money on purchasing items or services, with the amount they pay including not just what they paid but also the time and effort that went into processing and delivering those customers’ purchases. As such, revenue is a measure of economic activity generated by businesses or consumers.

3. Profit Maximisation – Profit maximisation is the goal of every business. By definition, it is the process of increasing profits to the maximum possible level. This can be done in a variety of ways, but typically it involves increasing sales and reducing costs.

For many businesses, profit maximisation is the ultimate goal. It is what drives them to become more efficient, and to find new ways to increase their market share. While there are other goals that businesses may pursue, such as customer satisfaction or market share, profit maximisation is always at the heart of it.

Profit maximisation is the process of finding the level of output at which the Marginal Revenue (MR) is equal to the Marginal Cost (MC). In other words, the business is looking to produce the level of output that will bring in the most revenue possible while keeping costs as low as possible.

This is a challenging goal, but it is essential for businesses to achieve in order to stay afloat. The goal of profit maximisation ensures that businesses are always looking for ways to improve their operations and increase their profits.

Profit maximisation is the primary goal of any business. By definition, profit maximisation is the act of increasing profits to the greatest possible level. This can be done in a variety of ways, but the key is to always be looking for ways to increase profits.

For many businesses, this means finding ways to reduce costs while also increasing revenue. It can be a tricky balancing act, but it’s essential to stay focused on the goal of profit maximisation.

There are many different ways to achieve profit maximisation, and the key is to find the approach that works best for their specific businesses. Some businesses focus on increasing sales, while others focus on reducing expenses.

No matter what approach one takes, the goal is always the same: to maximise profits. By keeping this goal in mind, one can ensure that their business is always moving in the right direction.

4. Firms Supply Curve – In economics, a firms supply curve is the marginal revenue curve associated with its production function at any given point in time. Firms typically produce identical products at different prices, and are assumed to be price-takers. In order to price their products correctly, product suppliers must know at what point, and how much of their product to produce.

A firm’s supply curve shows the amount of a good or service that a business can produce in a certain period of time. The curve is shaped by all factors related to the business, such as the type of industry, competitors, and technology.

The supply curve is the relationship between the quantity demanded and the price at which a good is supplied. If a firm wants to maximise its profits, it will produce at the point where marginal revenue equals marginal cost. The relationship between price and quantity demanded can be described in both constant rates of growth and variable rates of growth.

The supply curve for a good is the relationship between price, and quantity demanded at different profit levels. The supply curve tells producers how much they can charge for their goods.

5. Market Supply Curve – In economics, a market supply curve is the representation of the relationship between individual suppliers, and consumers in a market. It shows the relationship between price, and quantity supplied by sellers, or more generally, any property of economic agents. A market demand curve is the counterpart of a market supply curve for consumers.

A market supply curve is a curve that shows the relationship between the quantity demanded of a good, or service and its price. The market supply curve is typically represented with a graph that shows both marginal values, and slopes of the demand curves at various prices.

The market supply curve is a graph that describes the relationship between price, number of suppliers, and quantity supplied for all products in an economy. The curve shows how supply changes in response to changes in price.

The supply curve is the graph of the quantity supplied at different price levels. In other words, it shows how much of a good or service is supplied when its price changes by one unit.

6. Price Elasticity of Supply – In economics, price elasticity of supply is a measure of the responsiveness of demand to changes in price. It is used to describe changes in demand when there are changes in price.

In economics, price elasticity of supply is the percentage change (Δ) in quantity demanded caused by a 1% change in the price.

In economics, the price elasticity of supply is defined as the percentage change in quantity supplied of a commodity per unit change in price. In other words, it measures the responsiveness of the quantity produced to changes in the price level.

The price elasticity of supply shows how a change in the price affects the quantity supplied. A positive correlation suggests that any change in prices will increase production, while a negative one results in a decline in production.

We hope that the offered Economics Index Terms for Class 12 with respect to Chapter 4: The Theory of the Firm Under Perfect Competition will help you.

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