For a perfectly competitive firm, the marginal cost of producing an extra unit of output is shown using the MC curve "(in blue)" whereas the average total cost of producing an extra unit of output is shown using the ATC curve "(in red)". As stated above, a perfectly competitive market has a large number of buyers and sellers and the demand does not change with output. Hence, the demand curve, the average revenue and marginal revenue curves are horizontal "(in green)". The point in which the demand curve intersects the vertical axis is the price of the product sold by the firm.
As firms are assumed to be profit-maximising, the firm will thus produce at the output level where the marginal cost equals to the marginal revenue (MC = MR). Hence, the firm will be producing an output of Q in the diagram. As the average total cost curve also meets at this point, the firm is thus earning normal profits in the long run.
A marjket where there's perfect competition is difficult to find in the real world, mainly because of the restrictions.
Monopolistic competition
Monopolistic competition is a market form. Like with Perfect competition, there are many buyers and sellers. But the market is not perfect. This is because the products are not homogeneous, or because the buyers have explicit or implicit preferences.
This market form is quite common. As an example, take a bakery. There are many bakeries in the town, but one of those bakeries can demand a slightly higher price for bread, because it is the only one in a certain part of the town.
Monopolistically competitive firms are able to gain a greater degree of market share and as a result, increase prices. If a particular bakery is known for selling the best pies and pasties in town, they can increase their prices for pies and pasties as they know consumers will pay slightly more for a superior product. This is known as establishing a brand name and brand loyalty.
Supply and demand
Supply and demand is a model of microeconomics. It describes how a price is formed in a market economy. There are two determining factors on such a market, the number of things made available, called supply, and the number of things consumers want, called demand. Supply and demand shows how producers and consumers interact with each other. This relationship will fix the price for a certain type of good. In perfect competition, the quantity demanded (demand) and the quantity supplied will be equal. This happens at the equilibrium market price.
For normal goods, and a normal market, there are four basic laws that determine the change in the market, if either supply or demand changes:
When there is more supply, this will cause prices to fall because people will not want to pay more for items that can be found easily. When there is more demand, prices will go up because many people want to buy the same item but there is not enough supply for it.
When demands for new goods and services go up, new markets come into being. The greater the demand, the faster this happens. This greater number of providers makes the supply go up, which forces the price down toward the cost of production and distribution.
One of the first to see this was Adam Smith. In his book "The Wealth of Nations" (1776), he says that the demand was dependent on the price of a good. He did not see the inverse, that the demand also influences the price. David Ricardo published the book "Principles of Political Economy and Taxation" in 1817, where he explained market equilibrium as it is explained above. Others who are known for this model are Alfred Marshall and Léon Walras.
There are certain goods which violate the model above
The rules above are only valid for a perfect competition market: In such a market, there are many buyers and sellers, and no single buyer or seller can directly influence the price. If either the buyers or the sellers can influence this price, the market will react differently. Sometimes there is only one supplier (a monopoly). When this happens, the supplier chooses the price and the demand only determines how much is bought. The supplier will probably raise the price very high as long as people are still willing to buy at that price. If there is only one buyer, the market is called monopsony, and that buyer is able to fix the price.
Elasticity (economics)
In economics, people talk about elasticity of an economic variable, usually supply or demand, in relation to another economic variable such as income or price. The elasticity of a variable is a measure of how much the variable changes in response to a change in a second variable.
If the price for a good with a price-elastic demand goes up, the demand for it will go down. For example, people will buy fewer DVDs if DVDs get more expensive − DVDs have a price-elastic demand.
If a good has a completely price-inelastic demand, the demand for it will not be affected by the price of it. For example, if the price of salt increases, people will not buy less of it. They need their daily salt intake. The demand of salt is therefore price-inelastic.
Elasticity is often measured in percents. If a 2% increase in price causes people to buy 1% fewer of a product, it has a price elasticity of demand of -0.5.
Worcestershire
Worcestershire (ˈwʊs.təˌʃə; abbreviated Worcs) is a county in the West Midlands region of central England. From 1974 to 1998 it was part of Hereford and Worcester.
The county borders Herefordshire, Shropshire, Staffordshire, West Midlands, Warwickshire, and Gloucestershire.
Worcestershire is a fairly rural county. The Malvern Hills, which run from the south of the county into Herefordshire, are made up mainly of volcanic rock, some of which date from before 1200 million years ago. For more on the geology of the Malvern Hills, see the other websites section below.
Zlín
Zlín (from 1949 to 1990 Gottwaldov) is a town in the Czech Republic. It is on the Dřevnice River. The Bata Shoes company has developed this city. It is now famous for urbanism.
Metamorphosis
Metamorphosis in biology means the process of transformation from an immature form to an adult form in two or more distinct stages. Good examples are insects and amphibians. Life for most insects begins as a larva or nymph then progresses to the pupa stage and ends as an adult.
Animals that metamormetamorphosize include tadpoles into frogs, caterpillars into butterflys, bee larva into bees, and more
There are two main types of metamorphosis in insects:
simple metamorphosis or "hemimetabolism", and complete metamorphosis or "holometabolism".
Insects who go through simple (or incomplete) metamorphosis have three life stages. These insects start as eggs, which are usually very small. When the egg hatches, a larva or nymph comes out. Nymphs are just baby insects. Most of the time, the nymph looks similar to the adult, but it is smaller, may have different colouration, and does not have wings. The nymph grows through stages called "instars", shedding its 'skin' ("epicuticle") at each stage ("ecdysis"). Finally, it changes into a mature adult with wings.
Some insect nymphs are aquatic, which means they live in water. These nymphs usually have gills and look very different from the adults they will turn into. Nymphs that live in water are called "naiads".
Some insects that have a life cycle of egg-nymph-adult are:
Insects that have complete metamorphosis have four life stages. These insects start as eggs, which are very small. The egg hatches and a larva comes out. The larva looks like a worm and eats and eats so that it can grow much bigger. When the larva has grown it changes into a pupa. The pupa usually can not move or eat. The pupa is a special time when the insect is changing into an adult that will look very different from the larva or the pupa. Moth pupae (plural of pupa) are inside cocoons. When the pupa opens, the adult insect comes out.
Many insects have a life cycle of egg-larva-pupa-adult. Some of these insects are: