Q. 1. Explain how price is determined under perfect competition.
Answers
Explanation:
In perfect competition, the price of a product is determined at a point at which the demand and supply curve intersect each other. This point is known as equilibrium point as well as the price is known as equilibrium price. In addition, at this point, the quantity demanded and supplied is called equilibrium quantity.
Market
A market is a system which allows buyers and sellers to exchange goods and sevices.
Types of Market
- Perfect Competition
- Monopoly
- Monopolistic Competition
- Oligopoly
Perfect Competition
It is a condition where there are a large number of sellers, who sell homogeneous products, and a large number of buyers.
The market price of commodity is set by market forces of demand and supply.
How is Price Determined?
The market price of commodity is set by market forces of demand and supply.
If demand is moe than supply, market price rises and, if supply is more than demand, the price decreases.