One Assumption of the Basic Model of Supply and Demand

question 120

Multiple Choice

One assumption of the basic model of supply and demand is that

• A) buyers and sellers have enough information to make informed choices.
• B) buyers and sellers will benefit equally from a voluntary transaction.
• C) sellers will always have more information than buyers.
• D) buyers will always have more information than sellers.

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Definitions:

Resource Market

The marketplace where the inputs required for the production process (labor, raw materials, capital etc.) are bought and sold.

Wage Taker

An individual or entity that accepts the prevailing wage rates in the market due to the inability to influence them.

Wage Rate

A set amount of money given by an employer to an employee for services rendered, usually specified on an hourly or annual basis.

Purely Competitive

A market structure characterized by many buyers and sellers, free entry and exit, and a product so standard that no one controls the market price.