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Home Price and Output Determination Under Perfect Competition Distinction Between Market Price and Normal Price

 

Distinctions/Difference Between Market Price and Normal Price:

 

The main points of distinction/difference between market price and normal price are as follows:

 

(1) Market price is the price which prevails in the market at, any particular moment due to the temporary equilibrium of the forces of demand and supply. The normal price on the other hand, is the price which tends to prevail in the market in the long run. it is the result of long run equilibrium between demand and supply.

 

(2) Market price is the result of temporary causes and passing events which influences demand and supply or both; whereas normal price is affected by persistent and permanent causes in the long run. The market price oscillates round the normal price.

 

(3) Market price is the actual price which prevails in the market at any particular moment but this is not the case with the normal price. The normal price in actual practice seldom prevails in the market, because in the long run a change takes place either in demand or in supply conditions. In fact, the long run normal price like tomorrow

never comes.

 

(4) In the very short period, the cost of production has no effect on market price but in the long run, the normal price must be equal to both the marginal cost and the minimum average cost.

 

(5) All kinds of commodities have a market price but the normal price will be of those commodities which are reproducible. For instance, unique, diamonds or some old manuscript cannot be reproduced even if their demand rises. The supply will remain fixed. So we cannot measure their normal price.

Relevant Articles:

Market Structure
Perfect Competition
Equilibrium of the Firm
Short Run Equilibrium of the Price Taker Firm
Short Run Supply Curve of a Price Taker Firm
Short Run Supply Curve of the Industry
Long Run Equilibrium of the Price Taker Firm
Long Run Supply Curve For the Industry
Price Determination Under Perfect Competition
Market Price
Determination of Short Run Normal Price
Long Run Normal Price and the Adjustment of Market Price to the Long Run Normal Price
Distinction/Difference Between Market Price and Normal Price
Interdependent Prices
Joint Supply
Fixation of Railway Rates

Composite or Rival Demand

 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money
 

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