his discussion looks at perfectly competitive markets and the real world in more
ID: 1254899 • Letter: H
Question
his discussion looks at perfectly competitive markets and the real world in more detail:Is there a good or service you purchase currently that is sold in something close to a perfectly competitive market?
What leads you to believe this?
Which of the characteristics of a perfectly competitive market are apparent in your particular situation and how do you know this?
Have you noticed an increase in the amount of suppliers for some goods or services you buy?
Has this increase in suppliers made the market more competitive?
If so, in what way? If not, why do you think not?.
Explanation / Answer
On good I purchase frequently is cerea. This is a competetive market becasue of the ease of entry and exit into the market, and the large variety of homogeneous substitutes. When I go to the strore, I notice the price of the different types of cereal are similar in price. However, I also notice that the store brand is sometimes cheaper. Therefore, my demand for store brand is greater than the regular brand. When the price falls, I desire more cereal therefore, my quantity demanded increases. Ultimately, if everyone has the same view as me, the price will rise back to equilibrium. If the price was low for a long time, a signal will be sent to the market, and sellers will exit the market. This will shift the supply curve to the left, which will increase the price back to equilibrium. On ther other hand, if more suppliers entered the market, the price would drop due to the shift to the right in the supply curve. This would make the suppliers more competetive and this is why the price will decrease. Hope this helps
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