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The theory of the firm under perfect competition — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsThe theory of the firm under perfect competition6 Marks
Question
How is the equilibrium price determined under perfect competition? Explain with the help of a diagram.
OR
Show the determination of market equilibrium with the help of demand and supply schedules and a diagram.

OR
Explain the process of price determination under perfect competition with the help of a schedule and a diagram.
✓

Answer

Equilibrium price is determined under perfect competition by the interaction of the forces of demand and supply of a good. It is determined at a point where quantity demanded and quantity supplied of a good are equal. The following schedule and diagram illustrate the determination of equilibrium price:
Price(₹) Demand Supply  
5 100 500  
4 200 400  
3 300 300 Demand = Supply
2 400 200  
1 500 100  

The above table and diagram shows that the given market is in equilibrium at point X in the diagram and the equilibrium price is ₹ 3 and the equilibrium quantity is 300 units.

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