What Does Perfect Competition Mean?


2 Answers

Muhammad Abdullah786 Profile
It is a market structure where the uniform price is a charged for all the units of a good. Such market has following salient features:
In the perfectly competitive market all the units of good are homogeneous and identical. In other words in such market the units of a good sold do not have any type of a real or imaginary differentiation. Because of such property the price charged for the units of goods remains the same through out the market.

In perfect competition there a large number of buyer and sellers. Hence neither the buyer nor the sellers can unite themselves to influence the price. Rather in such market the price is settled by the forces of demand and supply. The price so determined by the market forces prevail in the market. And every buyer and seller has to accept such given price. In such situation a firm is a price taker because it has to face such a demand curve which is perfectly elastics.

In case of perfect competition the new firm can enter the industry and the old the firm can leave the industry and this condition is applicable in case of long run. In the presence of such condition the firm will be able to attain optimal factor combination.
Evelyn Vaz Profile
Evelyn Vaz answered
Perfect competition is basically an economic model that helps to describe a hypothetical market form. In this form the producer or the consumer does have any kind of market authority in order to make changes in prices.

The analysis of any perfectly competitive market is top give a very good stand to the theory of supply and demand. A perfect competition to be fulfilled needs to be steady on five parameters basically atomicity, homogeneity, equal access, free entry and results. A perfect competition is basically an adequate circumstance for allocative and creative effectiveness.

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