If you want to sell something at $10 but no one buys from you, what would you do?
Like every other firm, you will probably choose from one of two options:
- Lower your price.
Make your product (seem) better.
In a perfectly competitive market, option 2 is literally not an option. Producers all sell identical products and consumers know it for a fact. So in a perfect competition, you are left with option 1.
But hang on. Aren’t firms in perfectly competitive markets price takers? Why would they be able to control the price? Continue reading →