6. Large no. of buyers & sellers. Homogeneous products. Free entry and exit. Free from checks. Lack of selling cost. Perfect knowledge. Perfect mobility.

7. AR=MR REVENUE OUTPUT

8. PRICE PER UNITSUPPLY OF GOOD XDEMAND FOR GOOD X 5 50 10 4 40 20 3 30 2 20 40 1 10 50

9. QUANTITY PRICEPRICE EQ. PRICE SHORTAGE (a)INDUSTRY SURPLUS AB DS S D E AR=MR REVENUEREVENUE QUANTITY (b) FIRM

10. P1 P P2 D1 D D D2 E1 E E2 Q2 Q Q1 PRICEPRICE QUANTITY

11. D D E1 E Q1 Q Q2 QUANTITY E2 S S S2 S1 PRICEPRICE P1 p P2

12. Time Element LONG PERIOD VERY LONG PERIOD SHORT PERIOD VERY SHORT PERIOD MARKET PRICE SUB NORMAL PRICE NORMAL PRICETRADE CYCLES

13. It refers to that time period in which supply of a commodity cannot be increased beyond its existing stock, if demand has increased. The firm does not have time to increase its stock. It refers to that time period in which supply of a commodity can be increased only upto existing production capacity, if demand has increased. There is not enough time for a firm to install new machines nor for the new firms to enter the industry

14. It refers to that time period in which supply of a commodity can be increased or decreased according to the changed conditions of demand.The increased demand can be met by increasing the supply by installing new machines,or new firms enter the industry. It refers to that time period in which basic changes can be effected both in demand and supply. Demand is influenced by changes in the size of population,its tastes and habits, etc. Supply is influenced by changes in techniques of production.

15. Goods which perish very quickly are called perishable goods. For eg. Fresh vegetables and milk etc. P1 P P2 D1 D D2 S O E1 E E2 PRICEPRICE QUANTITY

16. Some goods can be stored for a long time, e.g. wheat,soap,oil,etc PRICE PER KGSUPPLY OF RICEDEMAND FOR RICE 5525 71020 915 112010 25 5 30 2

17. P1 P P2 D1 D D2 O E1 E E2 s Q2 Q Q2 s Market price of durable goods will be determined at a point where demand is equal to supply As shown in the diagram below- DURABLE GOODS