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A photograph of a man in a wheat field.
Depending upon the competition and prices offered, a wheat farmer may choose to grow a different crop. (Credit: modification of work by Daniel X. O'Neil/Flickr Creative Commons)

A dime a dozen

When you were younger did you babysit, deliver papers, or mow the lawn for money? If so, you faced stiff competition from a lot of other competitors who offered identical services. There was nothing to stop others from offering their services too.

All of you charged the “going rate.” If you tried to charge more, your customers would simply buy from someone else. These conditions are very similar to the conditions agricultural growers face.

Growing a crop may be more difficult to start than a babysitting or lawn mowing service, but growers face the same fierce competition. In the grand scale of world agriculture, farmers face competition from thousands of others because they sell an identical product. After all, winter wheat is winter wheat. But it is relatively easy for farmers to leave the marketplace for another crop. In this case, they do not sell the family farm, they switch crops.

Take the case of the upper Midwest region of the United States—for many generations the area was called “King Wheat.” According to the United States Department of Agriculture National Agricultural Statistics Service, statistics by state, in 1997, 11.6 million acres of wheat and 780,000 acres of corn were planted in North Dakota. In the intervening 15 or so years has the mix of crops changed? Since it is relatively easy to switch crops, did farmers change what was planted as the relative crop prices changed? We will find out at chapter’s end.

In the meantime, let's consider the topic of this chapter—the perfectly competitive market. This is a market in which entry and exit are relatively easy and competitors are “a dime a dozen.”

Introduction to perfect competition

In this chapter, you will learn about:

  • Perfect Competition and Why It Matters
  • How Perfectly Competitive Firms Make Output Decisions
  • Entry and Exit Decisions in the Long Run
  • Efficiency in Perfectly Competitive Markets

All businesses face two realities: no one is required to buy their products, and even customers who might want those products may buy from other businesses instead. Firms that operate in perfectly competitive markets face this reality. In this chapter, you will learn how such firms make decisions about how much to produce, how much profit they make, whether to stay in business or not, and many others. Industries differ from one another in terms of how many sellers there are in a specific market, how easy or difficult it is for a new firm to enter, and the type of products that are sold. This is referred to as the market structure of the industry. In this chapter, we focus on perfect competition. However, in other chapters we will examine other industry types: Monopoly and Monopolistic Competition and Oligopoly .

Questions & Answers

explain scarcity
Richard Reply
scarcity occurs when there are not enough resources to satisfy human's needs and wants therefore we need to allocate our resources using the price mechanism.
Isha
scarcity is when there is inadequate resources to catch the unlimited wants which would compel individual to make choice.
Prince
scarcity simply means when there's a shortages of resources to satisfy Hunan's need and wants in a particular time, which means the demand for it at the moment is higher than the supply
Abu
scarcity simply means when there's a shortages of resources to satisfy humans need and wants in a particular time, which means the demand for it at the moment is higher than it supply.
Abu
😂😂😂
Isha
That escalated real quick😂
Isha
joint or complementary demand
Ryt Reply
what is demand
Qudus Reply
it maybe define as the amount or quantity of goods and services which a consumer is willing to buy with the ability to pay at a given price at a particular time
Habib
yesoo thanks dear
Gyamfua
why is economics a science
Isaac Reply
Because science is all about thinking by making models whether a computational or Mathematical. Economics is a social sciences because it effects society but to understand Economics we use maths so it is a Science
Amit
hi
Mony
hello
Amit
I hope.......Economic is social science because it makes new new currency of money,it is decided the country’s depend system and the system be repeated others benefits in our ...
Anik
yeah
Habib
so what is the disadvantages of mix economic system
Habib
Economics is regarded as a social science because it uses scientific methods to build theories that can help explain the behaviour of individuals, groups and organisations.
Ali
The question is: why is Economic a "science" and not why is economics a "social science?" Alright folks?
Xavier
In my own understanding of why economics is a science it bcz it deals mainly on human resources just like biology that deals in the human body why economics is science it also deals on the management of human resources all over the world bcz without economics there will be no human resources
Ogbonnaya
what is technology
Nkwenti
my response to the earlier question is, economics is a science but not a pure science like biology, chemistry and physics. The reason is that those pure science study inanimate object while economics study human being, their experiment are predictable.
raimi
Economics is a social science subject that shows the relationship between ends and scarce means with their alternative uses
Ajenifuja
what is Equilibrium?
Fatima Reply
it means equal price and equal quality
Arthur
thank u Arthur!
Fatima
😇🙏
Fatima
Thanks
Moses
Equilibrium is a state of balance in an economy. In as far as market forces are reasonably concerned, equilibrium means the state at which the quantity of goods supplied is equal to the quantity of goods demanded.
Xavier
what is labour
Ayham
labor can be define as a both physical and mental effort of man put forward towards production
Habib
name the types of demand and explain any two
ALIMAMYISLA
Joint demand Composite demand Competitive demand
Ajenifuja
Labourcan be defined as man mental and physical exertion
Ajenifuja
what is elasticity
Motseoa Reply
difference between demand and supply
Adeyemi Reply
Demand- It is the desire of a buyer and his ability to pay for a particular commodity at a specific price. Supply- It is quantity of a commodity which is made available by the producers to its consumers at certain price.
Ali
yes OK thank you dear
Gyamfua
Demand can be defined as the ability a buyer is willing and able to pay at a specific price and in agiven period of time Supply can be defined as the ability the producer is willing to supply with a specific price
Ajenifuja
thanks
antony
what is labor force
Habib
restriction on international trade
Ayim Reply
formula for price elasticity of demand
Lognyuu Reply
what is average cost advantage and absolute cost advantage
Tamo Reply
what is demand
Home Reply
demand can be defined as the quantity of a commodity which people are willing to buy at particular times and at a given price .
YAHA
you are talking about campaney in my self ihave campaney why don't you calculated my business
Adow Reply
formula for price elasticity of demand
Emilia Reply
Suppose that a soft drink company calculates that the demand for a bottle of its soda increases from 100 to 110 after the price is cut from $2 to $1.50.
Ali
The price elasticity of demand is calculated as the percentage change in quantity demanded (110 - 100 / 100 = 10%) divided by a percentage change in price ($2 - $1.50 / $2).
Ali
what does unit price mean
Lognyuu Reply
unit price is the price for a single unit of measure of a product sold in more or less than the single unit.
Gyamfua
How do we find unit price?
Gyamfua
divide total cost by total units
Ali
I don't understand the unit Price
global
which one how find or what
Gyamfua
sorry how to find it or what
Gyamfua
please how do we find the unit price
Tabi
unit price or cost is the price per item when you purchase in a bulk
Gyamfua
example assuming you bought a pack of matches is 1gh but the pack contains 10 boxes so the price per the box is called the unit price ie divide 1gh by the number of matches boxes in the pack to get unit price/cost. NB unit here means one so price per 1
Gyamfua
you will divide total cost by total unit
Weto
yes please
Gyamfua
yes, in the matches scenario it's 1gh/10boxes which is equal to 0.10ps so the unit price of the one box of the matches is ten Ghana pesewas
Gyamfua
Thank you I now understand
global
Given that the price of a product has rose, the demand of the the product will decrease. Thus leads to a downward-sloping demand curve
M_geshnee Reply
The demand of consumers
M_geshnee
No demand curves have différent shapes. For examole guven that price of a product increase, the demand of that product will decrease thus It will lead to a downward sloping curve conversely there can be also a rightward shift in the demand curve when price a the good decrease demand will increase
M_geshnee

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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