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Hitesh Jhanji, Lovely Professional University Unit-12: Pricing Under Perfect Competition

Notes
Unit-12: Pricing Under Perfect Competition

CONTENTS

Objectives
Introduction

12.1 Equilibrium Price

12.2 Importance of Time Element in Price Theory
12.3 Comparison between Market Price and Normal Price

12.4 Summary
12.5 Keywords

12.6 Review Questions
12.7 Further Readings

Objectives
After studying this unit, students will be able to:

• Know equilibrium price.
• Understand importance of time factor in price theory.
• Compare between market price and normal price.

Introduction

After studying the concepts of income proceeds, we will discuss pricing under perfect competition
in the present unit.

12.1 Equilibrium Price

Two parties are dealing in the market—a buyer and a seller. Only after agreement between these two
parties, a product is sold and purchased at a definite price. Thus buyers and sellers i.e., demand and
supply have their impact on price determination.
Law of demand applies on buyers according to which price rise leads to decrease in demand and
reduction in price leads to increase in demand. Law of supply applies towards supply according to
which rise in price leads increase in supply and reduction in price of the product leads to decrease

LOVELY PROFESSIONAL UNIVERSITY 235