FORMS OF MARKET, PRICE DETERMINATION UNDER PERFECT COMPETITION WITH SIMPLE APPLICATIONS.
Market : Market is a situation in which buyers and sellers come into contact for the purchase and sale of goods and services.
Market structure: refers to number of firms operating in an industry, nature of competition between them and the nature of product.
Types of market
Features of perfect competition:
Features of monopoly:
Features of monopolistic competition
Main features of Oligopoly.
Features of pure competition
DETERMINATION OF PRICE UNDER PERFECT COMPETITION
Equilibrium: It means a position of rest, there is no tendency to change.
Market equilibrium: It means equality between quantity demanded and quantity supplied of a commodity in the market.
Equilibrium price: This is the price at which market demand of a commodity is exactly equal to the market supply.
Market demand: It refers to the sum total demand for a commodity by all buyers in the market.
Market supply: It refers to supply of a commodity by all the firms in the market
SIMPLE APPLICATION TOOLS
Price Ceiling:- means maximum price of a commodity fixed by the government that the sellers can charge from the buyers. It is imposed on necessary commodities like wheat , rice , kerosene, oil, sugar etc. Price ceiling results in excess demand and less supply in the market. It is below the equilibrium price.The shortage of commodity in the market results in following implications
Price Floor (minimum support Price) :- it is fixed by the government necessarily above the equilibrium price. Sometimes when government feels that the price for a particular good or service should not fall below certain level and sets a floor or a minimum price for these goods and services
Example: - Imposition of support price on agricultural commodities in case of requirement the government fixes the support price above the equilibrium price. Price floor results in excess supply and less demand.
Application of Demand & Supply Analysis on FAD Theory. Food Availability decline theory is illustrated in terms of the demand Supply Analysis. A drastic fall in the total availability of food causes massive starvation and famine. The casual link is that a large scale cline in food supply pushes the market price up to such a level that many poor people can no longer afford to buy the minimum amount for survival.