Perfect Competition Test - 4

A demand curve can shift due to various factors, including changes in the price of complementary goods, changes in taste and preferences, and population changes.

• If the price of complementary goods changes, it can affect the demand for the goods in question. 
• Changes in consumer preferences or tastes can lead to shifts in demand.
• Changes in population size or demographics can also impact demand. A growing population may lead to increased demand for certain goods and services, while a declining population may result in decreased demand. 

Elasticity of demand refers to the degree of responsiveness of quantity demanded to changes in price. In other words, it measures how sensitive consumers are to changes in the price of a product or service. When demand is elastic, a small change in price leads to a proportionally larger change in quantity demanded, indicating that consumers are highly responsive to price changes. Conversely, when demand is inelastic, price changes have a relatively small effect on the quantity demanded, suggesting that consumers are less sensitive to price changes.

In perfect competition, products are homogeneous. This means that all products offered by different firms in the market are identical or indistinguishable from one another. Consumers perceive no difference between the products of various firms in terms of quality, features, or branding. 

In perfect competition, each firm is a price taker because many sellers are offering homogeneous products. As a result, no individual firm has the market power to influence the market price.

The elasticity of demand for the product in a single firm in perfect competition is infinite because all the sellers are selling identical products.

Haberler propounded the opportunity cost theory of international trade. Gottfried Haberler has attempted to restate the comparative costs in terms of opportunity cost. He demonstrates that the doctrine of comparative costs can hold valid even if the labour theory of value is discarded. The theory determines the cost of producing a commodity in terms of the alternative production that has to be foregone for producing the commodity in question.

Perfect competition is a type of market where there is large number of buyers and sellers who deals in a homogeneous product due to which no individual unit can influence the price of the product and the firms have to quote the price that prevails in the market because of the customer's knowledge about the price.

In such a competition if a new firm enters the industry in the long run where the firms earn only normal profit then at the prevailing price the supply increases. As the supply increases, there will be a fall in the price of the firm.

Under perfect competition, the factors of production are typically mobile. This means that resources such as labor, capital, and land can move relatively freely between different uses and locations in response to changes in market conditions. For example, workers can easily switch between employers, capital can be reallocated to different industries, and land can be repurposed for different uses. This mobility of factors of production helps ensure that resources are efficiently allocated across the economy, as they can flow to where they are most valued and productive.

In the Indian market, globalization has led to the emergence of a buyer market. Globalization has led to increased competition in the Indian market.

In perfect competition, when the marginal revenue and marginal cost are equal, profit is maximum. In order to maximize profits in a perfectly competitive market, firms set marginal revenue equal to marginal cost (MR = MC).