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Why is the price elasticity of the demand curve of an individual firm in perfect competition is always infinite?
Wiki User
∙ 11y ago
Under perfect competition, the industry is defied as a group of firms producing a homogeneous product. The technical characteristics of the product as well as the services associated with its sale and delivery are identical. Hence there is no way in which a buyer could differentiate among the products of different firms. If the product were differentiated the firm would have some discretion in setting its price. So the firm is a price taker and its demand curve is infinitely elastic.
Wiki User
∙ 11y ago
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What is the Price elasticity of demand in each of the four market structures - perfect competition monopoly monopolistic competition and oligopoly?
Perfect competition is perfectly elastic (taken from my Economics textbook)...still searching on the other three.
What is the definition of perfect elastic?
AKA Infinite elasticity of demand. Means a change in price will not effect quantity demanded. Such as necessary goods/services to survival.
What are the 4 underlying assumption in the model of perfect competition?
Infinite amount of buyers and sellersHomogeneous goodsNo barriers to entryEveryone has perfect knowledge about the marketPrice is determined by supply and demand
How could coal have perfect elastic demand?
It could be perfectly elastic if the population demanded whatever can be supplied of coal at one price and no other. Its elasticity would have to be infinite.
Why perfect elasticity of demand does not exist?
In a perfectly elastic situation quantity is infinite. If you believe in God then infinity can have a meaning. If you do not believe in God then infinity is only theoretical for mathematical purposes.
What is the Price elasticity of demand in each of the four market structures perfect competition monopoly monopolistic competition and oligopoly?
Perfect competition is perfectly elastic (taken from my Economics textbook)...still searching on the other three.
What is the Price elasticity of demand in each of the four market structures - perfect competition monopoly monopolistic competition and oligopoly?
Perfect competition is perfectly elastic (taken from my Economics textbook)...still searching on the other three.
What is the definition of perfect elastic?
AKA Infinite elasticity of demand. Means a change in price will not effect quantity demanded. Such as necessary goods/services to survival.
What are the 4 underlying assumption in the model of perfect competition?
Infinite amount of buyers and sellersHomogeneous goodsNo barriers to entryEveryone has perfect knowledge about the marketPrice is determined by supply and demand
How could coal have perfect elastic demand?
It could be perfectly elastic if the population demanded whatever can be supplied of coal at one price and no other. Its elasticity would have to be infinite.
Why perfect elasticity of demand does not exist?
In a perfectly elastic situation quantity is infinite. If you believe in God then infinity can have a meaning. If you do not believe in God then infinity is only theoretical for mathematical purposes.
Which is the reason why there is no advertising by individual firms under pure competition?
Under pure competition, firms produce a homogeneous product, so there is no reason to advertise. Pure competition is also known as perfect competition.
Is IBM perfect competition?
IBM is a company, so it can't be a perfect competition. Only industries can be a perfect competition, or not.
Is it possible to perfect your communication skills?
Perfection is a concept, but not a reality. There is no way to "perfect" a skill as it would take a near infinite amount of time for an individual to reach "perfection." The best an individual can hope for is to constantly improve their skills.
What possesses perfect fluid elasticity?
Nothing, probably.
Is bottled water considered a perfect competition?
Perfect competition to what. Please be specific.
What are the advantages of perfect or pure competition?
Perfect competition relates to existence of situation where demand for a product is equal to supply of product and there is equilibrium condition. The elasticity of demand and supply are coherent and the prices are not dependent upon the price variations. Customer are at free will. These are the advantages of perfect competition. Perfect competition is defined as a situation where there: Are many small buyers and sellers (firms) each too small to affect the price - the firms are "price-takers". Is a homogeneous product [all are identical]. Is free entry and exit. This means that firm can join or leave the industry - it is both allowed and costs nothing. Is perfect knowledge. If we take out "perfect knowledge" (which never exists in the real world) and leave the first three assumptions, we get "pure competition". It is less than perfect, but is still very competitive
