FIGURE 8.8 Adjustment Process in a Constant-Cost Industry In (a), demand increased and supply met it. Notice

that the supply increase is equal to the demand increase. The result is that the equilibrium price stays the same as

quantity sold increases. In (b), notice that sellers were not able to increase supply as much as demand. Some inputs

were scarce, or wages were rising. The equilibrium price rises. In (c), sellers easily increased supply in response to

the demand increase. Here, new technology or economies of scale caused the large increase in supply, resulting in

declining equilibrium price.

8.4 Efficiency in Perfectly Competitive Markets

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Apply concepts of productive efficiency and allocative efficiency to perfectly competitive markets

• Compare the model of perfect competition to real-world markets
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