The basic assumption in the supply and demand model is that

The basic assumption in the supply and demand model is that buyers and sellers are operating in a competitive market. True false

Solution

When we use the supply and demand model to explain a market, we are implicitly making a number of assumptions about that market.

Supply and demand analysis assumes competitive markets. For a supply curve to exist, there must be a large number of sellers in the market; and for a demand curve to exist, there must be many buyers. In both cases there must be enough so that no one believes that what he does will influence price. Everyone must be a price taker and no one can be a price searcher. If there is only one seller, that seller can search along the demand curve to find the most profitable price.A price taker cannot influence the price, but must take or leave it. The ordinary consumer knows the role of price taker well. The assumption that both buyers and sellers are price takers is a crucial assumption and often it is not true with regard to sellers. If it is not true with regard to sellers, a supply curve will not exist because the amount a seller will want to sell will depend not on price but on marginal revenue.

So this statement is true.