Commodities like gold often trade in markets that are exampl

Commodities like gold often trade in markets that are examples of perfect competition. Think a commodity that you believe trades in a perfectly competitive market, and describe why you believe this is so.

Solution

Commodities like gold often trade in perfectly competitive markets.

The main features of perfectly competitive markets are -

1) There are many sellers.

2) The product is identical.

3) They are many buyers.

4) There is free entry and exit.

5) The government does not intervene in the market.

6) An individual seller cannot affect the price.

An example of a perfectly competitve market is a local fish market. Fish is a commodity that trades in a perfectly competitve market. In a local fish market, products are generally identical.There are many buyers and buyers have knowledge of the product they are buying. There are many sellers selling fish. There is free entry and exit in the market. The government does not intervene in the market. An individual seller cannot affect the price in the local fish market since there are many sellers.