What are the assumptions behind the model of a perfectly competitive industry in long-run equilibrium?
Date Submitted: 11/01/2003 23:44:09
Category: / Business & Economy / Economics
Length: 3 pages (958 words)
Category: / Business & Economy / Economics
Length: 3 pages (958 words)
What are the assumptions behind the model of a perfectly competitive industry in long-run equilibrium?
In this essay I will discuss the assumptions behind the model of a perfectly competitive industry in long-run equilibrium. The economist's model of perfect competition is highly theoretical, but is does provide a useful tool of economic analysis. In perfect competition the industry is made up of a large number of small firms, each selling homogeneous (identical) products to a …
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…market, and visa versa.
In conclusion, the assumptions that economists make are realistic as to the part where it is still theoretical. Beyond theory the assumptions are no longer realistic as there is no company that will be a 100% identical to the next one, or there is no whole market of firms that can live um to the assumptions. This is why the economists have to be flexible and adjust the model for every case.
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