A Market Consists of Potential Buyers of a Good or Service

question 47

Multiple Choice

A market consists of potential buyers of a good or service. However, for a market to exist

• A) the business requires wholesalers and retailers.
• B) one firm must dominate in sales and product development.
• C) people must have unsatisfied wants and needs as well as a willingness and ability to buy.
• D) the product must be laboratory tested and approved by the Food and Drug Administration (FDA).

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Definitions:

Commodity Traders

Individuals or entities that buy and sell physical or financial commodities, aiming to profit from price fluctuations.

Bid-ask Spreads

The variation between the top price a buyer intends to pay (bid) and the bottom price a seller is prepared to take (ask) for an asset.

Market Equilibrium

The state in which market supply and demand balance each other, and as a result, prices become stable.

Competitive Industry

Competitive industries are characterized by three factors: (1) firms produce a product or service with very close substitutes meaning demand is very elastic, (2) firms have many rivals and no cost advantage over those rivals, and (3) the industry has no barriers to entry or exit.