The market for public utilities, such as gas and electricity, does not exhibit the two primary characteristics that define perfectly competitive markets."A. TrueB. False

Question

Yosef Mclaughlin

Business

20 November, 19:23

The market for public utilities, such as gas and electricity, does not exhibit the two primary characteristics that define perfectly competitive markets."A. TrueB. False

+3

Answers (1)

Know the Answer?

Jocelynn Pineda · Answer 1

A. True

Explanation:

Gas and electricity are called necessity goods. They are deemed too important to do without. They are essential to life. These categories of goods are insensitive to changes in income level.

Two primary characteristics that define perfectly competitive markets that necessity goods deviate from are:

· Demand is elastic. In perfect competition demand is inelastic i. e. Increase in price will lead to a significant change in quantity demanded. This is not so in necessity goods because these goods are essential to life. So increase in price of these categories of goods or decrease in income level of households will not have effect on the consumption of the goods.

· Bargaining Power of Supplier is high. In perfect competition, bargaining power of supplier is low i. e. suppliers have little power in influencing the price of goods but for necessity goods, reverse is the case. The bargaining power of suppliers is a little bit higher. Suppliers can influence price while consumers adjust.