Hello,

I am looking for a 250 word answer on how the vegetable market is an example in the marketplace that describes the principles of the free market and competition.

The topic is "perfect completion". This is what the explanation is to see the terms needed in the answer: 

Perfect competition is an ideal, a benchmark and is not realistic. It does not exist and is a model.  I have often searched for a perfect competition example in the real world without success, but do your best in getting as close as you can for purposes of your discussion question. Perfect competition is not necessarily better than other market structure model, just one variant among several. The key idea is that it is supposed to produce the lowest price possible for a specific product. This is envisioned to occur because of the interplay of one’s initiative and another’s reaction to the initiative, hence competition. Artificial interjections by man, such as externalities, accommodations and favors, are not allowed to get in the way and influence the price in strict economic terms. The equilibrium price therefore becomes a pure price without any embedded “spin”.

The assumptions of perfect competition are clearly spelled out in the text, but I want to add some common sense and depth to each:

Many buyers and seller—therefore no market power for anyone; market forces are therefore unimpeded.

All produce homogenous products –no differentiation and all firms are price takers.

All market information is known and perfect--- clearly unrealistic, but a goal strived for in pursuit of a level playing field for all. In the securities market, for example, traders trading on material non-public information go to jail/get fined/become sanctioned.

Easy entry/exit—no barriers …come and go as you chose.

Further at a more technical and advanced level beyond your text:

Prices serve as guideposts to communicate scarcity and can therefore be trusted;

Resources are all private property with all rights defined and assigned with full transparency;

Property rights are fully enforced by government, and enforced without partiality; and

All market participants have the right of liberty and autonomy to act.

The goal of perfect competition is “allocative efficiency” which translates into the highest level of social well-being. This is supposed to be achieved naturally based on the above assumptions which imply a moral order of honesty and transparency. Many economists relate that to “Pareto optimality or efficiency” meaning that a better allocation is impossible. This is also frequently referred to as the First Fundamental Theorem of Welfare; it is based on the unwritten assumption that there exists a moral market of normative social practices which are believed and shared, and … followed. This is at odds with the governing belief in economics that market participants are strict rational egoists, and therefore totally selfish maximizers. Such maximizers, unconstrained by social practice, produce externalities (intentional, incidental and accidental)

SophiaPretty

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Status NEW Posted 08 Aug 2017 05:08 AM My Price 10.00

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