Conditions of a perfect competition Many buyers and sellers Sellers offer identical products Buyers and sellers are well informed Sellers can easily enter and exit the market The Law of Demand says ID: 911211
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Slide1
Coke or Pepsi…
Can YOU tell?
Slide2Conditions of a “perfect competition”
Many buyers and sellers
Sellers offer identical products
Buyers and sellers are well informed
Sellers can easily enter and exit the market
Slide3The Law of Demand says…
There is an INVERSE relationship between price and demand. In other words, the lower the price the higher the demand and the higher the price the lower the demand.
Suppliers, like Coke and Pepsi operate under the PROFIT MOTIVE (and there’s nothing wrong with that!).
Slide4Coke and Pepsi could increase demand by…
Lowering prices
Slight problem – that would cut into profits!
Or by convincing you that only THEIR product can satisfy your thirst!
How do they do this?
ADVERTISING!
Slide5The point is…
Even if you are able to identify the correct product, you’ll probably find that it is more difficult than you thought.
As an economic thinker, does it make sense to ever buy the one that is NOT on sale?