Economics Denzel Presentation (Perfect Competition)
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Denzel Partnership presents a new sushi restaurant concept called Sushi 360o that will operate in a perfectly competitive market. The key characteristics of this market are fierce competition, substitutable products between competitors, easy entry and exit for firms, and price being determined by demand rather than any individual firm. The document discusses the cost and revenue graphs that demonstrate long-run equilibrium for a competitive firm. It notes both the advantages of low barriers to entry and incentive for efficiency in competitive markets, as well as the disadvantages of lack of control over prices and small returns.
Economics Denzel Presentation (Perfect Competition)
- 1. Denzel Partnership Presents Sushi 360º
- 2. The Nature of Our Market Perfect competition Our competition is fierce Advertising is useless All information is public
- 3. The Nature of Our Market Demand is extremely elastic The large market reigns supreme over prices Every product is substitutable with others in the market Efficient Easy entry and exit
- 4. Graphs Important points of perfect competition
- 5. Quantity Cost P = MR= AR= D Long run equilibrium in perfect competition MC AC Qe 0
- 6. Long-run equilibrium (industry) Price Quantity S D 0 P Q^ (industry)
- 7. Cost Quantity P = MR= AR= D MC AC Q1 C P1 Firm in perfect competition making supernormal profit 0
- 8. Price Quantity S1 D P1 Q1 S2 P2 Q2 0 Cost Quantity P1 MC AC Q1 C P1 P2 Q2 The impact on a market of supernormal profit 0
- 9. Short-run losses Cost Quantity C P Q Loss MC AC P=MR=AR=D
- 10. Break-even price Cost Quantity MC AC P=MR=AR=D
- 11. Shut down point Cost Output MC AC P=MR=AR=D AVC C E D B P A P1 Q 0 Loss
- 12. How We Determine Cost Price is completely determined by the market Price takers not price makers Costs must meet market price Variable: wages, supplies Fixed: rent
- 13. Advantages We can easily enter the market with little investment Necessity for efficiency keeps us competitive We have a huge market before us Free information can keep us innovative Safe and reliable investment
- 14. Disadvantages Stolen innovation No control of the market Only way to improve is cost reduction Small Returns not too impressive
- 15. Farewell Live long and prosper.