It is appropriate to use the supply-and demand-model if,in a market,
A) everyone is a price taker with full information about the price and quality of the good.
B) firms sell identical products.
C) costs of trading are low.
D) All of the above.

Question

Quizplus · Accepted Answer

All of the above factors indicate a competitive market, which is the typical setting in which the supply-and-demand model is used. If everyone is a price taker with full information, there are no market distortions that would prevent the forces of supply and demand from determining the market price. If firms sell identical products, they will all have the same cost of production, so the market price will also reflect the equilibrium between supply and demand. Lastly, if costs of trading are low, then it is easy for buyers and sellers to enter and exit the market, further ensuring that the market price reflects the true supply and demand conditions.

It Is Appropriate to Use the Supply-And Demand-Model If,in a Market