1. PERFECT COMPETITION, MONEY & BANKING

2. OUTLINE.
 Market Structures
 Perfect Competition Definition and Axioms
 Examples of perfect competition
 Short-run equilibrium
 Long-run equilibrium
 Shutdown point
 Advantages of PC
 Money & its functions
 Characteristics of Money
 Banking
 Functions of the central Bank
 Functions of commercial banks
 Demand for money and the motives for holding it

3. MARKET STRUCTURES
 Market- Is an arrangement that brings buyers and sellers
of goods and services together.
 Market Structure-The nature and degree of competition
within a particular market.
 Types of MS includes......
 Perfect competition
 Monopolist Competition
 Oligopoly
 Duopoly
 Monopoly
 Monopsony

4. PERFECT COMPETITION DEFINITION AND AXIOMS
 A market in which there are many buyers and sellers
with no individual power to influence market price.
 It is based on the following axioms
 Large number of buyers & sellers
 Product homogeneity
 Free entry and exits of firms
 Profit maximization
 Perfect mobility of factors of production
 Perfect knowledge
 No government regulation

5. EXAMPLES OF PERFECT COMPETITION:
 Financial markets –
 stock exchange,
 currency markets,
 bond markets?
 Agriculture
 EBay

6. SHORT-RUN EQUILIBRIUM OF A PCM
 A firm is in the short –run equilibrium when it produces the
output that maximizes profit. (P=TR-TC)
 It is possible for an individual firm to make abnormal profit.
 Graphical
Representation of
A Firm in a short-run
Equilibrium making
Abnormal profit.

7. LONG- RUN EQUILIBRIUM OF A PCM
 All firms earn normal profits because other firms can
enter the industry to compete off the any profit being
enjoyed in the short-run.
 Graphically,

8. SHUTDOWN-POINT
 Shut down point is a point where firm stop producing .
 When a firm is making loss, it will have to decide
whether to continue production or not.

9. ADVANTAGES OF PERFECT COMPETITION:
 High degree of competition helps allocate
resources to most efficient use
 Normal profit made in the long run
 Firms operate at maximum efficiency
 Consumers benefit

10. MONEY AND ITS FUNCTIONS
 Any thing that is generally accepted in exchange for
goods and services and as payment for debt.
 Functions:
 A medium of exchange or means of payment
 A unit of account
 A store of value
 A standard of deferred payment
 Money then can also be define as, anything that is
generally accepted as a medium of exchange, a store of
value, a unit of account, and a standard of deferred
payment.

11. CHARACTERISTICS OF MONEY
 Acceptability
 Portability
 Divisibility
 Homogeneity
 Duplicability
 Durability
 Stability of value

12. BANKING
 Bank-Any institution that perform essential functions as:
 Accept deposits
 Offer draft
 Make loans
 Commercial Bank-Any bank that accepts deposit and
transacts business(including creating credit) with the aim
of making profit.
 Central Bank- Is the bank at the apex of the banking
system of a country or region.
 It is designed to supervise the banking system and regulate the
quantity of money in the economy.

13. FUNCTIONS OF COMMERCIAL BANKS
 Accepts deposit
 Demand deposit(current account)
 Time deposit
 Savings deposit
 Lending money to their customers
 Act as agent for their customers
 Foreign trade financiers
 Store of valuables for their customers
 Payment of wages on behalf of Customers
and Government

14. FUNCTIONS OF CENTRAL BANKS
 Supervision of the financial system
 Issues & withdraws notes and coins
 Government’s Bank
 Management and administration of national debt
 Implementation of monetary policy
 Acting as the banker’s bank
 Lender of last resort
 Manages the exchange rate policy
 Research work

15. DEMAND FOR MONEY & MOTIVES FOR
HOLDING MONEY
 Demand for money describes the desire or willingness to
hold a given stock of money for any reason.
 It is the desire of individuals and firms to hold cash instead
of investing it.
Motives
 Transactionary Demand for money
 Financial Innovations like ATM
 Institutional factors e.g. time between paydays
 The size of the firm
 The Price level
 Precautionary Demand for money
 Speculative Demand for money-

16. REFERENCE(S)
 http://encyclopedia.thefreedictionary.com/Perfect+competito
n
 Bernard Guerrien, economics and mathematices teacher in
Paris Panthéon-Sorbonne
 The Arrow-Debreu model has nothing to do with competition
and markets
 A handout on micro and macro economics by Prof.
Lawrence Adu Kofi(University of Cape Coast, Ghan
GROUP MEMBERS
Afreh Kwame, Adewale Ademoye, Elisante Kimambo and
Abel Sunday