Essay on An Evaluation Of A Competition Environment

784 Words Nov 14th, 2014 4 Pages
Chapter 6 explores the firm behaviour while operating in situations of horizontal demand, which implies a perfect competition scenario. The assumptions made clear while evaluating the perfect market assumption was that all the players in the market were privy to equal information and production resources, which is largely not the case in the real world. In my opinion, the implications of the assumptions influenced the perception of many students towards the content of the chapter. However, the lessons from the view of a percept competition environment can be extrapolated to use in firms operating in current competitive markets.
An important lesson learnt is that firms operating in perfect competition are unable to set the price and are usually prices takers. The price is determined by the intersection of the demand curve and the supply curve. The implications of the assertion are that each individual firm responds to the demand-supply paradigm. An evaluation of the abovementioned ideology suggests that for the perfect competition to hold true, then all the players in the market are of the same size and have access to similar resources.
In general, the market demand curve for a market operative in perfect competition is a downward sloping curve for ordinary goods. The curve slopes down to reflect that the cost of ordinary goods is inversely related to the demand function. Simply, the price of a good or service reflects the demand in the market as the price of the good…

Related Documents