Economics

I love reading your comments on my blogs. It helps me understand how people think. I should have started at the beginning. It is important to understand that Economics is a Behavioral/Social science. Economics is about how people make choices and the collective effect those individual choices have on society as a whole. It is to a large extend based on quantitative data.

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Perfect competition

Perfect competition means:

  • There are many small companies relative to the size of the industry (no monopolies or companies big enough to control prices)
  • Products produced by the different companies are identical.  There are perfect substitutes and demand for the products are perfectly elastic.
  • Entry and exit barriers are low. Competitors can freely enter and exit the market.