Perfect Competition Identify characteristics of perfectly competitive markets

Perfect Competition Identify characteristics of perfectly competitive markets. Perfect Competition Commodities Barriers to Entry BAUMAN 2019

A market is any venue where buyers and sellers meet. BAUMAN 2019

In a competitive market, a large number of firms produce the same product. BAUMAN 2019

Perfect Competition 1. 2. 3. 4. Many buyers and sellers. Sellers offer identical products. Buyers and sellers are well-informed. Sellers are able to enter and exit the market freely. BAUMAN 2019

Markets for fruits and vegetables are usually perfectly competitive markets. BAUMAN 2019

Commodities • Commodities are sold in perfectly competitive markets. • A commodity is a product that is the same no matter who produces it. • Milk, petroleum, and apples are examples of commodities. BAUMAN 2019

Milk is milk. It is exactly the same regardless of who sells it. BAUMAN 2019

Barrier to Entry • Any condition that makes it difficult to enter a market. • High start-up costs. • Technical knowledge. BAUMAN 2019

If opening a new business requires hundreds of thousands of dollars, that high start-up cost is a barrier to entry. BAUMAN 2019

Needing a tremendous amount of technical knowledge is another example of a barrier to entry. BAUMAN 2019

Questions for Reflection: 1. List the four conditions of perfect competition. 2. Define commodity and provide an example of a commodity. 3. What is a barrier to entry? 4. Provide two examples of barriers to entry and explain why they are barriers to entry. 5. Why are few markets perfectly competitive? BAUMAN 2019