Competitive Equilibriums

AAA

DEFINITION of 'Competitive Equilibriums'

An equilibrium condition where the interaction of profit-maximizing producers and utility-maximizing consumers in competitive markets with freely determined prices will give rise to an equilibrium price. At this equilibrium price, the quantity supplied is equal to the quantity demanded.

INVESTOPEDIA EXPLAINS 'Competitive Equilibriums'

While the basic supply and demand model is based on individual consumer and firm behavior, the competitive equilibrium model is based on the behavior of aggregate consumers and firms in competitive markets. It can be used to predict the equilibrium price and total quantity in the market, as well as the quantity consumed by each individual and output per firm.

RELATED TERMS
  1. Scarcity Principle

    An economic principle in which a limited supply of a good, coupled ...
  2. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited ...
  3. Intertemporal Equilibrium

    An economic concept that holds that the equilibrium of the economy ...
  4. General Equilibrium Theory

    General equilibrium theory studies supply and demand fundamentals ...
  5. Economic Equilibrium

    A condition or state in which economic forces are balanced. These ...
  6. Recursive Competitive Equilibrium ...

    An equilibrium concept associated with dynamic programs. Recursive ...
RELATED FAQS
  1. What is the effect of price inelasticity on demand?

    Price inelasticity is very beneficial for businesses. It offers firms greater flexibility with prices while the percentage ... Read Full Answer >>
  2. Does perfect competition exist in the real world?

    First, let's review what economic factors must be present in an industry with perfect competition: 1. All firms sell an ... Read Full Answer >>
  3. Why is Game Theory useful in business?

    Game theory was once hailed as a revolutionary interdisciplinary phenomenon bringing together psychology, mathematics, philosophy ... Read Full Answer >>
  4. What are some real-life examples of the economies of scope?

    Real-world examples of economies of scope can be seen in mergers and acquisitions (M&A), newly discovered uses of resource ... Read Full Answer >>
  5. How reliable or accurate is marginal analysis?

    Marginal analysis is designed to show how economic reasoning allows actors to accomplish more by understanding limits on ... Read Full Answer >>
  6. What is the difference between research and development and product development?

    The difference between research and development and product development is that research and development is the conception ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Economics

    Introduction To Supply And Demand

    Find out all about supply and demand and how it relates to your daily purchases.
  3. Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  4. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  5. Personal Finance

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  6. Personal Finance

    Microeconomics

    This tutorial teaches the basics of one of the most important economic topics. A must for all investors.
  7. Options & Futures

    Game Theory: Beyond The Basics

    Take your game theory knowledge to the next level by learning about simultaneous games and the Nash Equilibrium.
  8. Fundamental Analysis

    The Basics Of Game Theory

    Break down and examine the potential consequences of economic/financial scenarios.
  9. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  10. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center