PSYC 1001 Chapter 14: NChapter 14 Economics Note
8 Mar 2016
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Competitive market: a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. A competitive market is sometimes called a perfectly competitive market. It has two characteristics: there are many buyers and many sellers in the market, the goods offered by the various sellers are largely the same. And sometimes: firms can freely enter and exit the market in the long run. Because of these conditions, the actions of any single buyer or seller in the market have a negligible impact on the market price. Each buyer and seller takes the market price as it is given. Buyers and sellers in competitive markets are said to be price takers. A firm in a competitive market tries to maximize profit. Entry and exiting the market are powerful forces in shaping the long-run outcome in competitive markets. Page 293: total revenue is proportional to the amount of output.
