![What are the underlying assumptions of a free market? What are the underlying assumptions of a free market?](https://digitalteachers.co.ug/wp-content/uploads/2022/09/Bbosa-Science.png)
What are the underlying assumptions of a free market?
- There are many buyers and sellers in the market. Each one being to small to determine the output or pricing decision of an industry
- There is free entry and exit into and from the industry
- Products produced are homogeneous
- There are perfect knowledge among producers and consumers regarding price and quality of output
- There is no government intervention in the activities of firms especially in fixing prices and directing production
- There is perfect mobility of factors of production
- There is no advertisement costs incurred by the firms
- Firms are price takers and an industry is said to be price marker
- There is absence of collusion
- Firms are maximizing profits
- Price determines the allocation of the resource
- Consumers are said to be indifferent
CATEGORIES Economics
TAGS Dr. Bbosa Science