Competitive Markets

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  • Competitive Markets.
    • Market Defintion
      • Where buyers / sellers exchange goods / services, usually for money.
    • Markets are a way of allocating resources.
      • It doesn't have to be a place, or involve a physical exchange.
      • e.g someone will exchange their resource (labour) for a salary.
    • Free Market
      • Allocates resources based upon supply and demand and the price mechanism.
        • The Price Mechanism: changes in the demand / supply of a good / service leads to changes in its price / quantity bought / sold.
    • Definition:
      • Large numbers of producers compete with each other to satisfy the wants and needs of a large number of consumers.
    • Market Failure:
      • Happens when the free market results in undesirable outcomes.


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