Competitive Market ppt(group xii)

8/7/2019 Competitive Market ppt(group xii)

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under the guidance of

Prof. SAMIK SHOME

Submitted by

Dushant Dayal

Nisha Sharma

Varun BennurVidit Agarwal

Yangerjungla

----Group XII

(SEC-C)


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Perfectly Competitive MarketCompetitive market is defined as the form of market organisation in

which

(i) There are many buyers & sellers of a product ,each too small to affect

the price of the product.

(ii) The product is homogenous.

(iii) There is perfect mobility of resources.

(iv) Economic agents have perfect knowledge of market conditions.

(v) Free entry and exit of sellers.

(vi) There is no transportation cost.

(vii) The main aim of the firm is profit.

(viii) No government intervention.


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WHAT IS

TAX?

TAXis to impose a financial charge or other levyupon a taxpayer (an individual or legal entity) by

a state or the functional equivalent of a state suchthat failure to pay is punishable by law.

A tax is not a voluntary payment or donation, butan enforced contribution.


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Types of Taxes

Direct taxes :-may be adjusted to the individual characteristics of the

taxpayer (e.g. income taxes, taxes on property)

Indirect taxes:-are levied on transactions irrespective of the

circumstances of buyer or seller (e.g. taxes on the expenditure ongoods and services)

An expenditure tax is a tax on the sale of a particular commodity:

Specific sales tax

As a fixed amount per unit sold

Ad valorem tax

As a fixed percentage of the value of the commodity


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Price per unit

Quantity per day

D

S

S + tax

A

B

E

F

Govt. revenue

= A + B

Reduction in

producer

surplus = B + F

Reduction in

consumer surplus= A + E

Dead-weight loss = E + F

The burden oftaxation anddemand elasticity and

dead weight loss


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Taxation In Competitive MarketWhen Demand Curve is Elastic (1


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Max part of the tax is borne by the customer when

Demand Curve becomes more inelastic & Supply Curve

becomes more Elastic (eg. Food products such asvegetables).


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Tax and perfectly inelastic demand (elasticity = 0)

(eg. Essential commodities such as salt)

Price per unit

Quantity per day

D

S

S + tax

A

A = tax revenue,

paid entirely by

consumers

Producer bears

none of the tax

burden

No dead weight


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Tax and perfectly elastic demand (e= g)

eg. Unlimited internet.

Price per unit

Quantity per day

D

S

S + tax

B

Tax leads to

reduction in quantitydemanded, no price

adjustment

B = tax revenue, paid

entirely by producers

Consumer bearsnone of the tax

burden

C = dead-weight

loss

C


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If supply is perfectly inelastic then the tax iscompletely borne by producers.

Eg. Antique paintings

Price

Quantity

D

S+T

P E

O


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When supply is perfectly elastic then the tax iscompletely borne by consumers. (Eg. Packed mineralwater).

Price

Quantity

E+T

E

Pt

P

S+T

S

O

D


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Competitive Market ppt(group xii)

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