Achieving Equilibrium

Economists make many assumptions when analyzing a marketplace. These assumptions include:

There are many buyers and sellers: If there are limited participants in the market it is impossible to predict their actions. Similarly, if one participant dominates a market then they may use their market power to influence the price and quantity, rather than leaving this to market forces.
There is no (or limited) government intervention: The government intervenes in markets to ensure that a community standard of “fair” is met. However, in doing so they affect the free operation of market forces.
Consumers are assumed to have perfect knowledge: Without perfect knowledge consumers may act “irrationally” and purchase an item even though it is not the cheapest that is available.
Producers are assumed to have perfect knowledge: In particular, producers must have perfect knowledge of all available production and distribution techniques so that they can minimize their costs, and no competitor can gain an unfair advantage.
There are no barriers to entry: Anyone can enter any market at any time, so that competition is always guaranteed.
Resources are perfectly interchangeable: We can move resources between markets without penalty.
Products are virtually identical: And as a result the only differing characteristic by which consumers can make their decision is price.