KEY TAKEAWAYS The central characteristic of the model of perfect competition is the fact that price is determined by the interaction of demand and supply; buyers and sellers are price takers The model assumes: a large number of firms producing identical (homogeneous) goods or services, a large number of buyers and sellers, easy entry and exit in the industry, and complete information about prices in the market The model of perfect competition underlies the model of demand and supply TRY IT! Which of the following goods and services are likely produced in a perfectly competitive industry? Relate your answer to the assumptions of the model of perfect competition International express mail service Corn Athletic shoes Case in Point: Entering and Exiting the Burkha Industry Muhammed Ibrahim Islamadin was driving a cab in Kabul, Afghanistan, when the Taliban took over the country He foresaw the repression that would follow and sensed an opportunity He sold his taxicab and set up a shop for sewing and selling burkhas, the garments required of all women under the Taliban’s rule Mr Islamadin had an easy task selling, as women caught outdoors with exposed skin Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 471