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Essay / Three Characteristics of a Perfectly Competitive Firm
All firms in this market work with the same price, which is why a change in price by one firm can result in a drastic change in its profits. Elasticity is the measure of how consumer demand will respond to a change in price. Therefore, a perfectly competitive market is very elastic, because any change in price will affect the consumer's demand for the good or service. Companies will avoid differing their prices from those of other suppliers, because by doing so, customers will be able to easily give their business to any other company, selling the same good or service. This type of situation creates a horizontal demand curve in a perfectly competitive market; the price will remain constant, so demand will also remain consistent. A nail spa is a facility that offers nail care services such as manicures, pedicures, or other nail enhancements. This type of establishment is widely available throughout the country and is the ideal business to open in the Rio Grande Valley. Of course, a nail spa falls within a perfectly competitive market due to the factors that categorize it.