Perfect competition and markup

Hi Professor,
I am going through the micro-foundations of the SW model. Regarding the setup of Final Good producers, I am a bit confused over the following texts from the model appendix online:

The final good Yt is a composite made of a continuum of intermediate goods Yt(i) as in
Kimball (1995). The final good producers buy intermediate goods on the market, pack-
age Yt, and resell it to consumers, investors, and the government in a perfectly competitive

Then it says there is a price mark-up shock which is an exogenous process that reflects shocks to the aggregator function that results in changes in the elasticity of demand and therefore in the markup.

(please find attached the screenshot)

I am wondering if final goods producers operate in a perfectly competitive environment, wouldn’t their markup be fixed at 1, and where does this mark-up shock come from?

The final good does not feature a markup due to perfect competition. But that does not apply to the intermediate goods. Here, you have monopolistic competition and a markup.

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