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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

opportunity cost means the lose of other alternatives when the alternative is chosen
saad Reply
is the benefits that you loose by not selecting a certain alternative.
EDWINY
individual wants maybe unlimited, but means to satisfy them are limited there one has to forgo some alternative in order to acquire other alternative and it must according priority, that is when scale of preference set in for individuals to make choice
Rhaiymornd
hello everyone
Aliyu
Next best alternative forgiven
Shoaib
demand is the amount of goods and services that consumer is willing and able to purchase at a particular prices over given period of time
Rhaiymornd Reply
yep
Abraham
what's demand?
labi Reply
What customers want the most...
Abraham
not only what customers wants, want is just mere desire but demand is backed by purchasing power, ability and willingness
Rhaiymornd
thanks
Abraham
What's opportunity cost?
Abraham
what are the differences between demand and supply
Zakariyah Reply
who is called lender of the last resort
Divyanshu Reply
Hi
Linda
hlw
Karishma
Central bank
Majeed
hy
Karishma
Hello
Majeed
hy
Karishma
How are you
Majeed
Am gud
Linda
fine
Karishma
Am gud
Linda
hello
Chandra
Well! what's going on
Majeed
r u study in economics
Karishma
anybody there?
Chandra
r u study in economics
Karishma
the central bank
Sessay
Has completed already
Majeed
hey
neha
yes
Abigail
Yesss
Majeed
ok
Karishma
hey
Doctor
yh
Abigail
more questions
Sessay
how ar you
Doctor
split the price effect into income effect and substitution effect
Karishma
fine and u
Abigail
Hi
Godwin
hi
Hey, I am new here. Hope, discussion on Economics will clear our concepts more.
yasir
yes
Abigail
do u speak hindi or english
Karishma
how to consumer equlibrium through ic
Karishma
consumer equilibrium demand equals supply
Kenneth
the consumer is in equilibrium when the indifference curve is tangential to the budget line. or when the BL and IC intersect
Sessay
reasons indifference curve slopes downwards?
Kenneth
fine Abby any good,
Doctor
ur lost
Doctor
hey. im new year. economics teacher how we can discuss some thing interesting.
EDWINY
which one
Doctor
what do u understand the concept of poverty cycle.
EDWINY
hey
Ebong
I'm New here
Ebong
hi
ian
just new here guy's and also an Economics fresher of Kogi State University Anyigba
nelson
wxup
Ayegba
who can tell the laboratory of economic?
Amara
, Dennis Weissman Associates, LLC Laboratory Economics is the monthly business newsletter that gets behind the headlines and press releases.
Ayegba
sooo teah me what an LLC
Emmanuel
what's the topic
Adamsvictor Reply
economic systems
gracious
hello
Antonio
market
aba
hello where can I find the diagrams
Manu
Hello I am totally out ,I am not understanding why we are here. can someone help me out?
Amara
why Economic is not a pure science can someone help me out
Mohamed
because economics like science put forth a some hypotheses and then do experiments to prove them
Anwesh
but these experiments are not completely controlled
Anwesh
Hello
Comfort
hey
suraj
hi people can you help me out on "demand and supply"
Milton
Am not understanding can someone enlighten me pls
Bertilla
hi people can you help me out on "demand and supply"
Sessay
hello. if Mr.Patrick's income is #900.00 while that of Mr.Shodawe is #1300.00 if Mr.Patrick and Shodowe pay #90.00 and #130.00 as taxes,the tax system is?
Benjamin
I need the answer please
Benjamin
regressive tax system
shaikh
OK thanks
Benjamin
Isn't this called proportional tax rate because the rate stays the same - 10%? Tell me if I'm wrong
Ioan
Supply is perfectly elastic and demand increases.
kishore Reply
whose there
Waseem
show the demand curve
Hameed Reply
it slopes downward from left to right
Ama
how resources are allocated in a free economy
Charlotte Reply
explain how discriminating Monopoly increase profits
Charlotte
factors responsible for the emergence of monopoly situation
adelakun Reply
total output produced by a country over a given period of time .... can someone give me the term plz
TMM Reply
GDP
Anjorin
thaks man
TMM
Woman. 👍👍
Anjorin
gross domestic products
janet
GDP
Bertilla
GDP
Prof
GDP
Bertilla
gross domestic product
gross domestic product
GDp
Mohamed
gdp
agboola
what is recession pertaining to GDP
Prince
what is recession pertaining to GDP
Prince
what is recession
Prince
law of demand and supply
Zakariyah
All thing been equal
Temple
no i think recession is pertaining to GNP
owolabi
gross national production
Abraham
what is embago
Peter
all things being equal
Raphael
embargo restriction on trade by government of a country
owolabi
an official ban on trade or other commercial activity with a particular country.
Ayegba
Embargo.....an order by a common carrier or publ regulatory agency prohibiting or restric freight transportation
Ayegba
it's a complete band on important n export
Bertilla
who is Really Good in Mathematics. put me Through. Let Do Group Reading; am Preparing to Write Jamb this Year.
Andrew
Hi. C+I+G+x-m
Shoaib
Gdp aggregate demand are bit same
Shoaib
Dpd = c+i+g+(x-m) is aggregate demand
Shoaib
Gdp=c+i+g+(x-m) is aggregate demand
Shoaib
GDP= c+i+s+g+(x-m)
Saboor
Topic ended waiting for next topic
Shoaib
What is Terms of Trade (TOT)?
DADA
At what point a Terms of Trade can be favorable?
DADA
Define Expansion path
Girma
What is long run supply curve of a industry
Rashika Reply
enlightened
Ernest
all on board am here
Ernest Reply
am late I missed alot
Ernest
A mixed economy is the best type of an economy.Discuss
Tawanda Reply
Agreed Mixed economics is d combination of both capitalist and socialist economy, it give room for both individual and government to make decisions whereby giving room to a rapid development of d economy.
Anjorin
?
Andres
agreed
Ernest
Explain more about the Macroeconomics
Lizzy Reply
what is macroeconomic
Ekye
macro economics has to do with the of study economics at national level i.e the study of national economy as a whole. While micro is concerned with the study at individual, group or company level.
Andres
Andres explain
Ernest
ok
Ernest
what topic is capitalist economy based on
ADIBE
pls am not really understanding
Bertilla
pls can u explain more
Bertilla

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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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