Perfect Competition | A-Level Economics Notes
These revision notes cover everything you need to know about Perfect Competition for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What are the characteristics of perfect competition?
- no barriers to entry or exit
- perfect information
- identical products
- firms are price-takers
Perfect competition diagram in the short-run
Efficiencies in the short-run
- not productively efficient because MC≠AC at q1
- allocatively efficient because AR=MC at q1
What happens in the long-run in perfectly competitive markets?
- existing firms are making supernormal profit.
- since there is perfect information and no barriers to entry,
- new firms are attracted to join the market
- market supply increases
- each firm has less demand so AR and MR shifts to the left
- existing firms attempt to profit maximise but now they are only able to make normal profits