Page 252 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-12: Pricing Under Perfect Competition

wave of the sea is real but quiet water of the sea at the horizon is an illusion which is like mirage Notes
which is never quiet. These small waves of the sea are like market price whereas quiet water of
the horizon is like normal price. As Stonier and Hague have described, “In practical, normal price
will never come in long run. There will be normally some changes in the conditions of long run
equilibrium, before it is reached. Like tomorrow, long run never comes.” And the price prevails in
the market is always market price, not normal price.

12.4 Summary

• It is concluded with the above discussion that importance of time element in price theory is that
which force between demand and supply is more powerful in price determination, depends on
the time period. Normally, the shorter the time period, the more is the influence of demand on the
price determination and the longer the time period the more is the influence of supply on the price
determination.

12.5 Keywords

· Vertical: Standing straight.
· Perishable Commodities: Subject to decay Products.
· Durable Commodities: Safe products.
· Secular Period: Related to long time.

12.6 Review Questions

1. What is meant by equilibrium price? Explain.
2. Explain the importance of time element in price theory.
3. Differentiate between Market Price and Normal Price.
4. Which factors are considered by a seller to fix reserve price of his product?

Answers: Self Assessment

1. Vendor 2. Demand 3. Opposite 4. Analysis
5. (c) 6. (b) 7. (b) 8. (c)
9. True 10. False 11. True 12. True.

12.7 Further Readings

1. Microeconomics—Frank Cowbell, Oxford University Press, 2007.
2. Microeconomics— Robert S. Predik, Daniel L. Robinfield and Prem L. Mehta, Pearson
Education, 2009, PBK, 7th Edition.
3. Microeconomics— David Bosanko and Ronald Brutigame, Wiley India, 2011, PBK, 4th
Edition.

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