The perfect market economy model from introductory microeconomics is presented in a concise and graphical way. First the pure consumption economy is illustrated. Then the pure production economy is explained, and finally it presents the combined production and consumption economy. The assumptions underlying the perfect market economy model are often not made explicit. The following presents a list of the general assumptions.
Additional assumptions follow.
Preferences are transitive and stable. No asset specificity i.e. no quasi rents. No public goods. Separability of production. No economics of scale and scope.