Theory question 108
Market StructuresSection B
(a) Define a market
(b) Explain four characteristics of a perfect market.
Show the model answer
Model answer
(a) A market is any arrangement by which buyers and sellers are brought into contact to exchange goods and services at a price; it need not be a particular place.
(b) Any four:
1. Many buyers and sellers – no one can influence price.
2. Homogeneous (identical) products.
3. Perfect knowledge of market conditions by buyers and sellers.
4. Free entry and exit of firms.
5. One uniform price throughout the market.
6. Perfect mobility of factors of production.
7. No transport costs and no government interference.
8. No preferential treatment or advertising.
Explanation
Explain, not just list, the four.