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It's actually too oversimplified to be a great model for most things. Extend your intuition to imagine that you have perfect competition where there are infini
by vikramkr 7y ago
It's actually too oversimplified to be a great model for most things. Extend your intuition to imagine that you have perfect competition where there are infinitely many identical goods all competing to the lowest price either no differentiation, and people will price at zero profit. To extend that to the real world requires more and more complications like the time value of money etc
- hutzlibu 7y ago"Extend your intuition to imagine that you have perfect competition where there are infinitely many identical goods all competing to the lowest price either no differentiation, and people will price at zero profit. " But this is not reality. I doubt doing abstractions like these are helpful in understanding anything, when the base is so far off.
- vikramkr 7y agoYes nobody is denying that these arent reality. They're models, and you get far more sophisticated models after econ 101
- hutzlibu 7y agoOk. But then we are back at the beginning: "In a perfect free market the oil producers make zero profits" where this statement does not make sense, unless you apply weird economic definitions.
- vikramkr 7y agoRight, never said that was attainable or good. The point is that some people view perfect free markets as the ideal, and this is a move towards that, so people might view the market as getting g fixed rather than being broken.