It can be said that there is a perfect Market when there is a lot of buyers and sellers in this market and no individual seller or buyer influence the market price. The characteristics of a perfect Market are: * No firm is controlling the price of the Market which means the power should be shared. * No barriers and Freedom of entry into and exit. * The chance should be equal to access to factors of production. * There is a perfect information and knowledge. * No intervention by the government. * Homogenous good or service which means the product should not vary between different suppliers.
Among the Markets that contain those characteristics in England are : Super Markets. In England there are a lot of competitors in this Sector such Asda, Tesco, Morison … None of those companies is controlling this sector. Furthermore , we have the Restaurants of pizza which match with those characteristics too . There are a lot of Pizza Restaurants in England such as Papa johns, Pizza hut and Dominos. Here is A diagram which explain more what it’s said.
It can be understood that when the quantity of a product demanded equals the quantity supplied at the prevailing market price this is called a market equilibrium. When a company is in this situation, there is no reason to change the price. For instance, if a pizza firms produce exactly the quantity of pizza consumers are going to buy. In that case, there will no influence and reason to change the price. In Figure 3.6, the equilibrium price is shown by the intersection of the demand and supply curves. At a price of $8, the supply curve shows that firms will produce 30,000 pizzas, which is exactly the quantity that consumers are willing to buy at that price. In other cases like if the price is under the equilibrium price there will an excess of demand for the product. Excess demand occurs when, at the predominate market price, the quantity demanded exceeds the quantity supplied, meaning that consumers are going to buy more than producers are willing to sell. In Figure 3.6, at a price of $6, there is an excess demand equal to 16,000 pizzas: Consumers are willing to buy 36,000 pizzas (point c), but producers are willing to sell only 20,000 pizzas (point b). This mismatch between demand and supply will cause the price of pizza to rise. Firms will increase the price they charge for their limited supply of pizza, and anxious consumers will pay the higher price to get one of the few pizzas that are available. An increase in price eliminates excess demand by changing both the quantity demanded and quantity supplied. As the price increases, the excess demand shrinks for two reasons:
• The market moves upward along the demand curve (from point c toward point a), decreasing the quantity demanded.
• The market moves upward along the supply curve (from point b toward point a), increasing the quantity supplied.
Because the quantity demanded decreases while the quantity supplied increases, the gap between the quantity…