Question

Identify the market form for the two sellers of goods A and B, given the following information. Give reasons for your answer.

Output Sold (units)	Price of A (₹)	Price of B (₹)
10	5	5
20	5	4
30	5	3

Answer 1

1. For Good A (Perfect Competition):
   • The price of Good A remains constant at ₹5, even as the output increases from 10 to 30 units.
   • This indicates that the firm is a price taker, and it can sell any quantity at the prevailing market price.
   • This is a key feature of perfect competition, where firms have no control over price and face a perfectly elastic demand curve.
2. For Good B (Monopolistic Competition):
   • The price of Good B falls from ₹5 to ₹3 as output increases from 10 to 30 units.
   • This suggests that the seller needs to reduce the price to sell more units, implying some control over price.
   • This is a typical feature of monopolistic competition, where the firm faces a downward-sloping demand curve due to product differentiation.