Perfect Competition (market structure)

Perfect Competition

A market structure with many small buyers and sellers, featuring no barriers to entry or exit, homogeneous goods, and perfect information.

Elastic Demand

When Price Elasticity of Demand (PED) is between negative 1 and negative infinity, with PED = negative infinity indicating perfectly elastic demand.

Price Takers

Firms in perfectly competitive markets with a perfectly elastic demand curve, where demand equals average revenue and marginal revenue.

Long Run Equilibrium

In perfect competition, new firms enter the market attracted by supernormal profits until all profits are competed away, leading to a state where only normal profit can be made.

Short Run Loss

Occurs when firms in a perfectly competitive market make a loss, prompting them to leave the market due to no barriers to exit, resulting in a return to normal profit equilibrium.

perfectly elastic

PED = - ifinity demand is perfectly elastic

quantity in firms and market

• market diagram Quantity is in millions

• firms quantity is measured in the 10s