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Question
Explain how price is determined in a perfectly competitive market with a fixed number of firms.
Explain how price is determined in a perfectly competitive market with a fixed number of firms.
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Solution
Equlibrium price is the price at which demand and supply of a commodity are equal. It is determined by the interaction of the forces of demand and supply. It is determined at a point where demand and supply curves intersect each other.
The following schedule and diagram illustrate the determination of equilibrium price:
The above table and diagram show that the equilibrium price is Rs. 3 and the equilibrium quantity is 300 units.
Equlibrium price is the price at which demand and supply of a commodity are equal. It is determined by the interaction of the forces of demand and supply. It is determined at a point where demand and supply curves intersect each other.
The following schedule and diagram illustrate the determination of equilibrium price:
The above table and diagram show that the equilibrium price is Rs. 3 and the equilibrium quantity is 300 units.
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