<p>No, market demand is in there. The assumption of perfectly competitive market is that firm is a price taker. Consequently market demand is perfectly elastic so the inverse demand function that <strong>individual firm</strong> faces is given by:</p>
<p><span class="math-container">$$p(q_i)= \bar{p}$$</span></p>
<p>Once you substitute this inverse demand into profit function you get:</p>
<p><span class="math-container">$$\Pi = p(q_i)q_i - c(q_i)=\bar{p}q_i-c(q_i)$$</span></p>
<p>I use <span class="math-container">$\bar{}$</span> to emphasize that price is fixed but most undergraduate textbooks just use <span class="math-container">$p$</span>. Nonetheless, the demand is still there, just the demand one single firm faces is always perfectly elastic and independent of production of a single firm (even if demand for whole market isn't).</p>
<blockquote>
<p>Is perfect competition also a competitive equilibrium?</p>
</blockquote>
<p>Perfect competition is a model. A competitive equilibrium can be an equilibrium found in perfectly competitive model, but equilibrium itself is balance of various forces (e.g. supply-demand, revenue-costs etc.) or situation where players play their best response to what other players are playing.</p>

CC BY-SA 4.0
2022-10-07T22:29:49.373Z
I do get the idea but I still don't see the complete picture. I posted a [follow-up question](https://economics.stackexchange.com/questions/53003/perfect-competition-allocations). If time permits, please check. Thank you.
Rick_Morty
CC BY-SA 4.0
2022-10-02T21:41:16.097Z
2022-10-02T21:41:16.097Z
1muflon1
<p>In a perfectly competitive market, how are the market demands taken into consideration? Or is it that the market demand isn't a concept there as such due to a very large market and setting the price more will attract no consumer and less will attract as many consumers as will <span class="math-container">$p^*$</span>, the market price?</p>
<p>When maximizing profit <span class="math-container">$\pi_i = pq_i - c(q_i)$</span> for firm <span class="math-container">$i$</span>, we do not mention the market (inverse) demand <span class="math-container">$p(q)$</span> curve anywhere. This led me to ask this question.</p>
<hr />
<p>Edit: Slightly unrelated to my main question. While searching for a tag along the lines of perfect-competition, I saw competitive equilibrium. Is perfect competition also a competitive equilibrium?</p>

CC BY-SA 4.0
2022-10-04T00:08:14.177Z
Supply can be complementary in perfect equilibrium but usually it is revenue above inverse demand, costs, does p\* make. The trades *still happen along q* with ordinary profits, but *the **more eager participants actually get a better deal*** having the prices be made for them. `marginal demand utility == costs in perfect competition + ordinary profit`.
Nick Carducci for Carface Bank
<microeconomics><perfect-competition>
In a perfectly competitive market, how are the market demands taken into consideration?
Rick_Morty
# In a perfectly competitive market, how are the market demands taken into consideration?

(Asked by: username_0 on 2022-10-02)

In a perfectly competitive market, how are the market demands taken into consideration? Or is it that the market demand isn't a concept there as such due to a very large market and setting the price more will attract no consumer and less will attract as many consumers as will $p^\*$, the market price?

When maximizing profit $\pi\_i = pq\_i - c(q\_i)$ for firm $i$, we do not mention the market (inverse) demand $p(q)$ curve anywhere. This led me to ask this question.

---

Edit: Slightly unrelated to my main question. While searching for a tag along the lines of perfect-competition, I saw competitive equilibrium. Is perfect competition also a competitive equilibrium?

**Tags:** microeconomics, perfect-competition
> **Comments:**
> **username_1**: Supply can be complementary in perfect equilibrium but usually it is revenue above inverse demand, costs, does p\* make. The trades *still happen along q* with ordinary profits, but *the **more eager participants actually get a better deal*** having the prices be made for them. `marginal demand utility == costs in perfect competition + ordinary profit`.  

---

## 1 answers

### Answer by username_2 on 2022-10-02. Score: 1 | Accepted answer

No, market demand is in there. The assumption of perfectly competitive market is that firm is a price taker. Consequently market demand is perfectly elastic so the inverse demand function that **individual firm** faces is given by:

$$p(q\_i)= \bar{p}$$

Once you substitute this inverse demand into profit function you get:

$$\Pi = p(q\_i)q\_i - c(q\_i)=\bar{p}q\_i-c(q\_i)$$

I use $\bar{}$ to emphasize that price is fixed but most undergraduate textbooks just use $p$. Nonetheless, the demand is still there, just the demand one single firm faces is always perfectly elastic and independent of production of a single firm (even if demand for whole market isn't).

> Is perfect competition also a competitive equilibrium?

Perfect competition is a model. A competitive equilibrium can be an equilibrium found in perfectly competitive model, but equilibrium itself is balance of various forces (e.g. supply-demand, revenue-costs etc.) or situation where players play their best response to what other players are playing.

> **Comments:**
> **username_0**: I do get the idea but I still don't see the complete picture. I posted a [follow-up question](https://economics.stackexchange.com/questions/53003/perfect-competition-allocations). If time permits, please check. Thank you.  

---

