How Marshall’s contention defines a perfectly competitive market and its impact on equilibrium prices.

Marshall contended that in a perfect marker, the value of a good

was equal to its price

Marshall’s contention was that in a perfect market, the value of a good would be determined by competition between buyers and sellers, resulting in an equilibrium price at which the quantity of the good demanded by buyers would be equal to the quantity supplied by sellers.

In a perfectly competitive market, prices would be set by the forces of supply and demand, with no individual buyer or seller having the ability to influence the market price. This means that all participants in the market would be price-takers, meaning they would have to accept the prevailing market price for the good or service.

The equilibrium price and quantity that results from competition in a perfectly competitive market would be efficient in terms of allocative efficiency, meaning that goods would be produced and consumed in the quantities that are most desirable to society. This is because the market price, which represents the marginal cost of producing the good, would be equal to the marginal benefit to society of consuming the good.

However, it is important to note that real-world markets are rarely perfectly competitive and often have imperfections, such as oligopolies or monopolies, which can lead to market power and distortions in prices. Additionally, external factors like government regulations and taxes can also affect the equilibrium price and quantity in a market.

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