ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In a market characterized by perfect competition, price is determined through the mechanisms of supply and demand. Prices are influenced both by the supply of products from sellers and by the demand for products by buyers.

Detailed explanation-2: -Each firm in a perfectly competitive market is a price taker; the equilibrium price and industry output are determined by demand and supply.

Detailed explanation-3: -Equilibrium in perfect competition is the point where market demands will be equal to market supply. A firm’s price will be determined at this point. In the short run, equilibrium will be affected by demand. In the long run, both demand and supply of a product will affect the equilibrium in perfect competition.

Detailed explanation-4: -An equilibrium price is a balance of demand and supply factors. There is a tendency for prices to return to this equilibrium unless some characteristics of demand or supply change. Changes in the equilibrium price occur when either demand or supply, or both, shift or move.

Detailed explanation-5: -Under perfect competition, equilibrium price is determined at the point of intersection of market demand and market supply. An individual firm cannot influence the equilibrium price.