Nature and Structure of Markets — Flashcards

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A market in economics is an arrangement where buyers and sellers come in direct or indirect contact to buy and sell goods and services. It does not necessarily mean a physical place. It can refer to a…

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Competition is essential because, without it, different prices may be charged for the same commodity. Competition helps create a market where prices are formed by demand and supply rather than by one …

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Perfect competition is a market situation where there are a large number of buyers and sellers selling identical products. The product is sold at a uniform market price, and no individual seller or bu…

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A firm under perfect competition is called a price-taker because it cannot change the market price by its own actions. It can sell any amount of output at the prevailing market price, but it cannot se…

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A firm under perfect competition faces a perfectly elastic demand curve, which is horizontal. This means the firm can sell any quantity at the given market price, but if it tries to charge a higher pr…

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Firms earn only normal profits because products are homogeneous and there is free entry and exit. If profits become higher, new firms enter the market, increasing supply and reducing profit. In the lo…

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Under perfect competition, production cost is the only cost. Other costs such as advertisement, transport, storage, and insurance are assumed to be zero.

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Monopoly is a market situation where there is only a single seller of a good or service. There are no close substitutes for the product, so the seller has strong control over price and supply.