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The amount of excess capacity in pure competition tends to become larger the more elastic the individual firm's demand curve becomes.
Elastic
Describes a situation where the demand or supply for a good or service significantly changes in response to changes in price.
Pure Competition
A market structure characterized by a large number of buyers and sellers, uniform products, and free entry and exit, leading to price taking behaviour.
Excess Capacity
A situation where a firm is producing at a level less than its potential maximum output, indicating underutilization of resources.
- Understand the impact of market structure on firm behavior and economic outcomes.
- Comprehend the concepts of excess capacity and its significance in different market structures.
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Learning Objectives
- Understand the impact of market structure on firm behavior and economic outcomes.
- Comprehend the concepts of excess capacity and its significance in different market structures.
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