Economics and Statistics

Perfect competition happens when both buyers and producers are price takers, meaning they have no (individual) influence over the price of a product. Conditions for perfect competition: Large number of producers such that no individual producer's production represents a significant part of the total output in the market. Producers must sell their products (no matter the quantity) at a market price that is outside of their control (price-taker). This means that for firm that is a price-taker, its demand is perfectly elastic (horizontal). Producers sell homogeneous goods, meaning that consumers do not care from which sellers they buy the goods from. Producers do not face barriers to entry or exit. Producers are able to enter or exit the market freely. Understanding economic graphs under perfect competition: The price (Pm) is determined in the market becomes the demand curve for an individual firm (remember the firm is price-taker). Then, if the demand is horizontal, it follows by the...