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Long Run Equilibrium in Perfect Competition

The document discusses long run equilibrium under perfect competition, emphasizing that firms earn only normal profit. It outlines the determinants of supply, the law of supply, and provides an individual supply schedule and curve. Additionally, it explains price elasticity of supply and methods to measure it, including the percentage method.

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G 4 Genius malayalam
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12 views11 pages

Long Run Equilibrium in Perfect Competition

The document discusses long run equilibrium under perfect competition, emphasizing that firms earn only normal profit. It outlines the determinants of supply, the law of supply, and provides an individual supply schedule and curve. Additionally, it explains price elasticity of supply and methods to measure it, including the percentage method.

Uploaded by

G 4 Genius malayalam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Non focus

microeconomics
Chapter 4
Long run equilibrium under perfect
competition
 In long run all firms earn only normal profit (under PC)
 Cost FIRMS LRMC LRAC

 P

 Q (Output)
Supply

 Quantity of a commodity willing to produce/sell at a


particular price &particular time
Determinants of supply

 Relation between quantity supplied of a commodity


& its determinants
 Qs=f(P ,Pf , T ,G..)
 P price
 Pf  price of factors of production
 T  Technology
 G govt tax
Law of supply

 Other things remaining the same ,there is a positive


relation between price & quantity supplied of a
commodity
Individual supply schedule

Price Quantity supplied


90 0
95 10
96 12
99 18
100 20
Individual Supply curve

 Price ss

 quantity supply
Price elasticity of supply

 Degree of responsiveness of change qty. supply of a


commodity due to change in its price
methods to measure ES
1. Percentage method
1) Percentage method

 ES= x
 Eg. Price of petrol decreased from
60 to 55 , its supply decreased
from 1000 to 800
 Find Es
 Es= x = x = =2.4
a) Expansion &
contraction( movement along a
supply

curve )

 price
 expansion

contraction

 qty. supplied
b) Shifts in supply(increase
&decrease)

 Price
 decrease increase

 qty supplied

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