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Economics: Chapter 7, Section 1

Terms in this set (13)

an economic model that allows economists to examine competition among businesses in the same industry
market structure
the IDEAL model of a market economy
perfect competition
Are real markets ever perfect?
NO!!
product that consumers see as the same, regardless of the producer
standardized product
a business that cannot set the prices itself, but rather accepts the market price as determined by supply and demand.
price taker
what is the only way a seller can become a price taker?
if that seller meets all 5 characteristics of perfect competition
What are the 5 characteristics of perfect competition?
1. numerous buyers and sellers
2. standardized product
3. freedom to enter and exit markets (talking about sellers)
4. Independent buyers and sellers (deals with how prices are set)
5. well-informed buyers and sellers
WHICH CHARACTERISTIC:
- No one buyer or seller has control over PRICE
- Many sellers keep PRICES LOW
- Many buyers ensure ENOUGH DEMAND
Numerous buyers and sellers
WHICH CHARACTERISTIC:
- Consumers consider similar products equal, regardless of producer.
- Price is the only basis for consumer to choose one product over another.
- Examples: eggs, milk, steel, etc.
Standardized product
WHICH CHARACTERISTIC:
- no government regulations preventing buyers/sellers from participating in the market when they want
Freedom to enter and exit markets (has to do with sellers)
WHICH CHARACTERISTICS:
- Buyers cannot join with other buyers to INFLUENCE PRICE
- Sellers cannot join with other sellers to INFLUENCE PRICE
Equilibrium price is set solely through the interaction of supply and demand.
Independent buyers and sellers (deals with how prices are set)
WHICH CHARACTERISTIC:
- SELLERS know what their competitors are willing to charge.
- BUYERS know a good deal when they see one.
Well-informed buyers and sellers
any market structure that lacks one or more of the conditions needed for perfect competitions
imperfect competition
Sets with similar terms