PERFECT
COMPETITION
Definition
Perfect competition is a unique form
of the marketplace that allows
multiple companies to sell the same
product or service. Many customers
are looking to purchase those
products
None of these form can set a price
for the product or service they are
selling without losing business to
other competitors.
There are no barriers to any form
that is looking to enter or exit the
market.
The fi nal output from all the sellers
is so similar that consumer cannot
diff erentiate the product or service
of one company from its competitors
Many buyers and sellers
Homogeneity
Features
Free entry and exit
of Perfect knowledge
perfect Mobility of factors of production
competit Transport cost
ion Absence of artificial restrictions
Uniform price
Many buyers
and sellers
There will always be a huge
number of buyers and sellers
in this form of market. The
advantage of having a large
number of small size produces
is that they cannot combined
to influence the market price
Similarly, if there are many
buyers , then and individual
will not have the power to
decide conditions to the
market or influence the price
by all train demand for
product
Homogeneity
The product of service
produced by buyers in a
perfectly competitive market
should be homogeneous in all
respects. There should be no
diff erentiation between them
in terms of quantity size and
extra. So that the products
are perfect substitutes for
each other. If a seller tries to
charge a higher price for
products that are so similar
they will lose their customers
immediately
Free entry and
exit
Another condition of a
perfectly competitive
market is that no
artificial restrictions
prevent a firms entry or
compel and existing form
to stay put when they
want to leave. They
decision to enter stay or
leave the market
depends purely on
economic factors
Perfect
knowledge
The buyers and sellers have
perfect knowledge about the
market condition. The buyers or
aware of the details of the product
sold as well as its price. At the
same time the cell is know about
the potential sales of their
products at diff erent price points .
Since the buyers are already
informed about the product there
is no need for advertising or sales
promotion. So forms don’t have to
invest a single penny in this
activities. It also help save on
advertising or other marketing
activities which keeps the price of
their products low.
Mobility of factors
of production
The factors of production
like labour raw material
and capital should have
total mobility under
perfect competition. The
label should have the
freedom to move from one
place to another
depending on their
remuneration. Even the
raw materials and capital
should not have any
restrictions in moment
Transport cost
In perfectly competitive
market the cost for
transporting good service or
factors of production from one
place to another is either zero
OR constant for all sellers. The
assumption is that all seller or
equally near or further away
from the market. Thurs the
transport cost is uniform for
all of them. The result is that
overall cost for production and
the selling price are the same
across the board
Absence of
artificial
restrictions
There is no
interference from the
government or any
other regulatory body
to hinder the smooth
functioning of the
perfect competitions
Uniform price
There is a single
uniform price for all
products and service
in a perfectly
competitive market.
The forces of
demand and supply
determine it
Conclusion
Perfect competition is one
of the most smoothly
functioning markets with
many buyers and sellers
working together in total
harmony. Unfortunately it is
a hypothetical situation
that does not exist in
reality. But market should
aim to be closed as possible
to this form of market to
ensure a fair price for all
goods and service
