U3 AOS1 Market structure and the conditions for a free and perfectly competitive market

Question 1

market

Answer 1

is any type of arrangement that facilitates exchange between buyers and sellers.

Question 1

market capitalist economy

Answer 1

an economic system that relies mostly on the market or price system to make key decisions about what to produce, how to produce and for whom to produce. Resources are generally privately owned.

Question 2

price

Answer 2

is the purchase cost or amount paid in exchange for a good or service.

Question 3

perfectly competitive market

Answer 3

A perfectly competitive market is a market that satisfies the three characteristics:
- Firms must have ease of entry and exit into/out of the market
- Products must be identical and homogenous
- There are many buyers and sellers

Question 4

market structure

Answer 4

refers to the type and level of competition that exists in various markets, such as perfect monopoly or perfect competition

Question 4

relative profits

Answer 4

describe the level or rate of profit gained from producing one type of good or service, compared with the profit gained from producing an alternative good or service. Relative profits closely dictate how resources are allocated. Changes in the relative profit of producing a good or service reflects changes in relative prices.

Question 4

Consumer sovereignty

Answer 4

exists when consumers of goods and services, not governments, dictate how resources will be used through their purchases.

Question 5

Price signals

Answer 5

when the price of a product is determined by the supply and demand for that product. This means that the market reflects the true value of the product, based on how much consumers are willing to pay and how much producers are willing to sell