Firms in a perfectly competitive market may encounter some problems that can decrease their competitiveness and may even force them out of the market. The way they deal with problems such as taxes or other factors that increase their costs will determine whether they can stay in the market. In this Learning Path we’ll learn about these problems, how firms’ cost structures change, and how an equilibrium is reached in the market.
In order to understand all this, we’ll learn about:
Comparative analysis:
Comparative statics, used to analyse changes in equilibriums;
Economic surplus, which determines how well a firm is doing;
Cost variations may force a firm out of the market;
Taxes, imposed to consumers, producers or both.
Market clearing:
Supply and demand, how to determine them and how they behave;
Market clearing, which determines how the equilibrium is reached;
Cobweb models, a strange way to get to the equilibrium.
