1. The perfectly competitive market model is not so much intended to give us an accurate description of any real markets, as much as it is intended to provide us with a benchmark against which we can compare real world markets. Thus, it serves a similar purpose as a physicist’s model describing the fall of a feather in vacuum. It is not that the physicist believes that wind resistance does not matter, rather it is that in order to understand the effect of wind resistance we must first understand how the feather would fall if there was no such resistance to its fall.

That said, there are several markets in which we have a large number of potential buyers and sellers, where products are largely homogeneous, where most of the relevant information is easily available and where there are no formal restrictions on entry into and exit from the market. In practice, results in those markets are very close to what is predicted by the perfectly competitive market model. With this in mind, give at least three examples of markets that you believe are close to being perfectly competitive.

2. Most of our formal models of competition in markets tend to focus on competition that is based on prices and/or quantities that are produced of well-defined goods. Even so, real economic progress is generally based more on new products, new processes, and new ideas than it is based on price competition per se.  With this in mind, give at least two examples of products that were eliminated from the market due to innovations and the introduction of new and “better” products. Also, try to come up with at least two current products that you believe will eventually be eliminated based on future innovations. For this latter part, make sure to explain how and why you believe the products in question will be superseded by future innovations.