Determination of price and quantity supplied in perfectly competitive market in the short run treating demand as exogenous: Difference between revisions

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The following are some relevant features of competitive markets:
The following are some relevant features of competitive markets:


# Each firm is small in size relative to the totality of all firms supplying the good.
# Each firm is small in size relative to the totality of all firms supplying the good, and is competing solely on price (i.e., with no product differentiation).
# The firm is a ''price taker'' rather than a price setter, i.e., it has no leeway in deciding the price and must stick to the price prevailing in the market (there are exceptions to this when the price is ''not'' at the market equilibrium; see the [[convergence towards market price]] page).  
# The firm is a ''price taker'' rather than a price setter, i.e., it has no leeway in deciding the price and must stick to the price prevailing in the market (there are exceptions to this when the price is ''not'' at the market equilibrium; see the [[convergence towards market price]] page).  
# Whatever quantity the firm produces within its natural limitations can be completely sold at the market, i.e., the firm does not have to worry about unsold inventory as long as it prices products at the market price.
# Whatever quantity the firm produces within its natural limitations can be completely sold at the market, i.e., the firm does not have to worry about unsold inventory as long as it prices products at the market price.
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