Perfect Competition In this lesson students will identify

Perfect Competition In this lesson, students will identify characteristics of perfectly competitive markets. Students will be able to identify and/or define the following terms: Perfect Competition Barriers to Entry Standardized Products E. Napp

A market is any venue where buyers and sellers meet. E. Napp

In a perfectly competitive market, a large number of firms produce the same product. E. Napp/Helf

Perfect Competition FOUR CONDITIONS FOR PERFECT COMPETITION: 1. THERE ARE MANY BUYERS AND SELLERS. Suppliers feed a high level of demand Consumers enjoy wide open supply Helf

Perfect Competition FOUR CONDITIONS FOR PERFECT COMPETITION: 2. STANDARDIZED PRODUCTS PRODUCT/SERVICE MUST BE NEARLY IDENTICAL NO discernable difference between suppliers Helf

Perfect Competition FOUR CONDITIONS FOR PERFECT COMPETITION: 3. ANYBODY CAN TRY TO SUPPLY NO BARRIERS TO ENTRY Easy, low cost Helf

Perfect Competition FOUR CONDITIONS FOR PERFECT COMPETITION: 4. BUYERS AND SELLERS ARE WELL-INFORMED IDENTIFY COMPETORS AND PRICES INSTANTLY Able to Identify Options Instantly Helf

Markets for fruits and vegetables are usually perfectly competitive markets. E. Napp

Milk is milk. It is exactly the same regardless of who sells it. E. Napp

Perfect Competition: No Barriers to Entry A BARRIER TO ENTRY IS ANY CONDITION THAT MAKES IT DIFFICULT TO START PRODUCING A GOOD OR SERVICE High start-up costs are barriers to entry. (CAPITAL) A great degree of technical knowledge can also be a barrier to entry. (SPECIALIZED LABOR) E. Napp

Growing corn doesn’t require specialized knowledge. Growing WELL: Yes. E. Napp

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

Needing specialized knowledge is another example of a barrier to entry. E. Napp/Helf

Few markets are perfectly competitive. PRODUCTS MUST BE IDENTICAL IN A PERFECTLY COMPETITIVE MARKET. E. Napp

Opening a commercial airline industry requires a tremendous amount of capital and people with special skills (pilots). E. Napp

Exit Slip: Identify a product or service NOT mentioned in the slides that represents a perfect competition List at least 5 requirements you would need to produce that good or service (Land, Labor, Capital: raw materials, skills, equipment. ) Helf

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