Economics Essay Example | Topics and Well Written Essays - 1500 words - 29

Economics - Essay ExampleAt this specific combination of price and quantity, both the agents are maximize their self interests, keeping in mind the other agents sort and satisfying the condition of Pareto-Optimality (Google Docs, page 57-58).A competitive market is place by three main characteristics many another(prenominal) consumers and many sellers, freedom of choice under the umbrella of perfect information, and the assumption that the agents have a rational behavior in determining their choice, which essentially maximizes their self-interests. To ensure optimality of outcome, the existence of externalities is unacceptable (Howard, 1994, page 384)The market model of a competitive market is thus based on the general assumption that industries seek to maximize their put ons, and therefore are competitive. However, given the condition that a single stanch is just one part of the many firms in the market, it is projected that it give the gatenot affect the price of the commodi ty which in this case is the rainwater tanks. Hence an individual seller is just a price taker, it can be rightly said that it faces a flat demand curve (John and Akila, 2009, page 246)Referring to the diagram (perfect competition) below, the Supply Curve (Ms) interacts with the Demand Curve (Md) in the manufacture model, to determine the equilibrium price which is P1, that will become the demand curve of an individual firm i.e. the flat line AR=MC in the individual Firm model. The quantity supplied by the individual firm is Q1, and the quantity supplied by the overall industry would be the amount on the x-axis (Industry Output), corresponding to P1.The shaded area denoting the profit of any individual firm is an assumption based on the consideration that the supplier has an average cost below the price However, depending upon every individual firms own capacity to supply rainwater tanks and the respective average costs they face, they shall determine their supply curve, and all t he individual