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PERFECT COMPETITION AND EFFICIENCY: Perfect competition is the idealized market structure that achieves an efficient allocation of resources. The conditions of perfect competition, including (1) large number of small firms, (2) identical products sold by all firms, (3) freedom of entry into and exit out of the industry, and (4) perfect knowledge of prices and technology, ensure that perfect competition efficiently allocates resources. This is in fact the purpose of perfect competition: a market structure that illustrates perfection, the best of all possible resource allocation worlds. The real world falls short of this perfection.
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Lesson 12: Elasticity and Demand | Unit 4: Determinants
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Page: 18 of 25
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Topic:
Substitute Availability
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- Elasticity, especially the price elasticity of demand, is affected by three determinants:
- Elasticity determinants are three ceteris paribus factors -- include substitute availability, time period, and budget proportion -- that are held constant when calculating elasticity and that result in a different value of the coefficient of elasticity when they change.
- The most important elasticity determinant is substitute availability.
- Substitute availability makes it possible to switch from one good to another in response to price changes.
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LABOR The mental and physical human efforts used in the production of goods and services. This is one of four basic categories of resources, or factors of production. The other three are capital, land, and entrepreneurship.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store looking to buy either a birthday gift for your grandmother or a T-shirt commemorating yesterday. Be on the lookout for telephone calls from former employers.
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
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"You have to find something that you love enough to be able to take risks, jump over the hurdles and break through the brick walls that are always going to be placed in front of you. If you don't have that kind of feeling for what it is you're doing, you'll stop at the first giant hurdle. " -- George Lucas
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R&D
Research and Development
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