Price And Quantity Determination Under Perfect Competition - SS2 Economics Past Questions and Answers - page 1

(The price of a good or service decreases when there is a surplus in the market)

(Producers in perfect competition produce and sell the quantity that maximizes their profits at the point where their marginal cost equals the market price)

Perfect competition is a market structure characterized by a large number of buyers and sellers, homogeneous products, perfect information, easy entry and exit of firms, and no market power for any individual buyer or seller.

The market price and quantity of a good or service are determined by the forces of supply and demand.

Equilibrium occurs when Qd = Qs. Setting the demand equal to the supply and solving for P:

150 - 3P = 30P + 10

140 = 33P

P = 4.24

Substituting P into either the demand or supply equation gives:

Q = Qd = 150 - 3(4.24) = 137.28

Therefore, the equilibrium price and quantity of pizza in this market are $4.24 and 137.28 units, respectively.