Out of these options,

  • shampoo
  • apples
  • ice cream
  • hotels

Why is apple considered to be the best example of commodity in a perfectly competitive industry? And Why not others?

  • 3
    $\begingroup$ Here are some reasons why I use apple in introductory economics. It (1) starts with the letter A; (2) comes in countable/discrete units; (3) is a simple good that everyone is familiar with; (4) somewhat homogeneous (certainly more so than the other examples you give). I do not and neither I think does any economist assert that it is "the best example of commodity in a perfectly competitive industry". $\endgroup$ – Kenny LJ Jan 23 '19 at 2:24
  • $\begingroup$ @KennyLJ Got your point. And, I did meant the situation out of the mentioned commodities. $\endgroup$ – Sabbiu Shah Jan 23 '19 at 17:18

In a perfectly competitive industry model, out of the examples given, the apple is the commodity with the least differentiation in the market. It is considered to be a homogeneous product.

A person (in this model) is unlikely to care about finding a specific type of apple from a certain company that uses a certain type of advertising. They just want to buy "an apple." All things being equal, they will probably just purchase the apple with the lowest price.

The other examples of shampoo, hotels, and ice cream are heterogeneous in that these products have many ways of distinguishing their features from competing products. Design, advertising, packaging, utility, and other features stand out in addition to sensory features. Pricing can vary significantly since suppliers can make their products stand out from competing products.

(In reality, apples have a lot of variation, but in the model of perfect competition we just assume apples are of about identical size, taste, texture, weight, shape, etc. Apples are a classic example of a homogenous commodity, but not a perfect one because apples are not identical in the real world. However, they are probably more similar to a consumer comparing products than the other given options.)

| improve this answer | |

Not the answer you're looking for? Browse other questions tagged or ask your own question.