Consider a perfectly competitive market in long-run equilibrium where Essay

Consider a double-dyed(a)ly competitive foodstuffplace in long-run correspondence where all bulletproofs operate under the equivalent cost conditions. Suppose - Essay Example(70 marks) Market is a place where buyers and sellers meet each new(prenominal) for fulfilling ineluctably and generating profits. The form of market is of great importance in business and economics as it is amenable for defining its overall characteristics including the numbers and categories of suppliers, the variable or identical nature of the products offered by different firms in operation(p) in the same or different industries, is the market exhaustive enough or it allows the entry of about new competitor and most importantly the nature of the competition is it a perfect competition or not? The major decisions of different firms revolve around these basic features which lead to the analysis of offering wrong and the number of inventory to be produced (McEachern, 2011). As far as perfectly compet itive market is interested then it has the following features There is relatively quite a small number of sellers and buyers as compared to the needs of the customers and the overall market size. In this situation one firm has a very low essence over the market p sieve and trends. As a result not a single firm can practice complete control over the cost and price ratios. The perfectly competitive market deals in identical products i.e. all the firms in the market sale the same product with minor or negligible variations. The customer choices are therefore independent of the quality of the product and other characteristics of the products excluding the price factor. The market forces such as demand and supply work remedyly to decide the equilibrium price and equilibrium quantity, in addition to this the government policies affect the price and quantity ratios through taxes and subsidiaries. There is a free entry for all the firms in the market. They can leave or enter the market in all geographical location without facing any obstacles in their way. They can also apply whatever factors of ware they want to with whatever variations and manipulations. The market offers complete and comprehendible information about the products and services. Therefore the firms are conscious(predicate) of the quality and characteristics of their products which leads them towards better performance. It is an ideal market to work in as it ensures the profits and flexibility of operations. In addition to free will related to entrance and exit hence giving numerous advantages to the consumers and sellers two (Dodd & Hasek, 1952). Now lets consider the example of Rice market where the competition is perfect in nature. All the firms operating(a) in this particular market are having the same costing conditions which are pass judgment to remain at the equilibrium stage in the long run as well. The Automation engine room has become available to few of the firms in the market. This technology is pretty much useful for the production and encase purposes as it lowers the marginal cost per unit and therefore contributes in increasing the profit margin of the seller without the need of increasing the price of the commodity rather decreasing the cost of the product. The usage of the Automation engineering will have some short run and long run effects over the rice market whereas the factor prices and the demand of the product remain same. This will disturb the equilibrium state of the perfect competition. Application of some new technology is always beneficial for both the industry and the individual firms operating in the market as it is more effective and efficient than the previous