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micro economics

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Why are the firms in the perfectly competitve markets unable to control the prices of the goods that they produce?

  • micro economics -

    Because under a perfectly competitive market, there are lots of other producers trying to sell the same thing. Take for example a wheat farmer, and say the market price is $10 per bushel. What if the farmer charged $10.10, how much would he sell? Answer is zero, nobody would pay 10.10 when they could buy all they want at $10.00. Well, what if he charged $9.90. He would sell out of course and then feel like a schlemiel, because he could have just as easily sold all of his wheat for $10.

    Under the market price in a perfectly competitivie market, a person can immediately buy or sell at that price.

  • micro economics -

    Explained well, thanks.

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