Alright. So the first thing we wanna do is define the characteristics of a perfectly competitive market. We've talked about this before, when we talked about supply and demand. Let's dive in a little deeper now. Alright, so we're gonna call a market perfectly competitive when first the nature of the goods, so the goods for sale in a perfectly competitive market are identical. Right? Remember we were talking about perfectly competitive, that was like agriculture, like wheat, right? You can't tell one farmer's wheat from another farmers week, right? So they're gonna be identical goods. And when we set the price in this market, remember that the buyers and the sellers, they don't get to pick what the price is, right? The price is set by the market. So we call them price takers, they don't get to make the price, they take the price as given by the market conditions. Right? So like we saw there's gonna be lots of buyers, right? And lots of sellers were saying almost infinite. Right? And what that does is that they have no influence on the price, when they have no influence on the price that makes them a price taker, they just have to take the price as it comes. So there's lots of buyers, lots of sellers in this market. We've talked about these points before. Now, I'm adding this one point right here, because once we start talking about these market structures, the entry and exit into the market is also an important factor. Alright, So when we talk about entry and exit, it's whether a firm can just, oh, I want to start producing wheat. So I'm gonna just start producing wheat or I don't want to produce wheat anymore. I'm gonna get out of this market, right? So entry and exit, when we talk about perfect competition, they can freely enter and exit. If you wanna, if you wanna start a farm and start producing wheat, there's not really much stopping you, you just need to go get a farm and you just start growing wheat, right? So anybody can enter exit a perfectly competitive market. And like we've seen um wheat right, is a perfect example. Any kind of agricultural product is always a good example of a perfectly competitive product. Um And that's probably what we'll focus on is some kind of agricultural product or foreign exchange markets, right? When you think about you want to get a Euro for a dollar or something, right? You can't distinguish $1 from another dollar or €1 from another. So those are perfectly competitive markets as well. Alright, so let's go ahead and move on. In the next video, we'll talk about the demand curves uh in a perfectly competitive market. So let's go ahead and do that. Now

Alright. So now let's see what an individual firms demand curve in a perfectly competitive market looks like. Now when we go through the next few chapters are focuses mainly gonna be on the individual firm, how are they gonna make their decisions about, you know, the price or the quantity that they put out about making profit? Right? So we want to see what the firm demand curve is gonna look like in perfect competition. So let's start the whole market right? When we think about the market for for wheat or some perfectly competitive product, it's like we were like, what we saw when we studied supply and demand, right? We're going to see that we're gonna have some sort of downward demand, right? The double Ds demand curve downward, and then some upward supply curve in the market, right? There's gonna be more supply as the price goes up, and less demand as the price goes up. Right? So that's kind of what we're used to, right? We've seen something like that, we've got our X. And we know that right here in the middle this point, right? Here, that is our equilibrium in the market, right? So that remember when we're talking about price takers, this is the price that the firm has to take. Is this equilibrium price. So this is the price on the market, right here, we're gonna call it P star, right? That's the price on the market of equilibrium. And this is the equilibrium quantity, right? That's the quantity that's gonna be demanded and supplied at that price. So now let's think about the individual firm, how is their demand curve gonna look remember they have to take this price. And if you also remember, there's so many firms in the market that no matter what we produce, um the price isn't gonna change, right? We can increase our quantity double triple the quantity we're producing. And still the price won't change because we're such a small fraction of the market, we don't have any influence. So what's gonna happen is at this price that the market sets all the way across here? The individual firm is gonna have a straight demand curve, a straight line, just like that. Right? And what did we call that? We call that perfectly elastic, right? Um which is the horizontal demand curve. Let me get out of the way right here, because, right below me, I'm gonna write horizontal in here, because this is the only market structure with the horizontal demand curve. Okay, we're not gonna see this when we go to perfect, excuse me, monopolistic competition, Oligopoly, monopoly, none of them have this situation. So what does this entail for the perfect, perfectly competitive firm? So this is their demand curve right here, Right? This flat demand curve. Well, just like we were discussing right at any quantity, right, They can produce any quantity. Maybe this quantity right here? This quantity here. It doesn't matter as long as um they sell it at that price, they're going to sell all of their quantity, right? No matter how much they produce, it's all gonna be bought up by the market. So this is a perfectly, excuse me, a perfectly elastic demand curve, right? So the firm faces perfectly elastic demand and that means that if they tried to charge a higher price, right? If they tried to even raise the price by a penny, they're not gonna sell anything, they have to take that price from the market. Right? So this price over here that was set in the market, that's the price firms must sell at, right? This is where all the trades will happen. Alright, So this is the demand curve. This is kind of a unique situation that we're seeing here in perfectly competitive markets. So let's see how this um flat demand curve is going to affect our profit decisions and our cost, um how we pick how much we're going to produce. All right, so let's go ahead and dive into that topic. Now let's go, let's do that in the next video