Published by: sadikshya
Published date: 02 Jul 2021
A market said to be perfect competition market if there are large numbers of seller and buyers of the commodity, the product of the entire firm in the market are homogeneous. There is perfect mobility of resources and the consumers, recourse, owners, and firms in the market have perfect knowledge of present and future prices and cost. In simple words, it is a market structure in which a large numbers of seller sales their homogeneous product to a large number of buyers at 0 uniform prices. According to Iloutsoyannis ” perfect competition market is that market where structure characterized by a complete absence of revelry among the individual firm.
Under perfect competition there are a large number of firms producing homogeneous products and individual firms in such a market can not affect the price of the commodity. The price of the commodity is determined exclusively by the interaction of the market demand and market supply, for this reason, the perfectly competitive firm is a price taker and sells any amount of the commodity the established market price.
The following are the main features of the perfect competition market.
Large numbers of buyers and sellers
There are large numbers of buyers and sellers in the market. But each one share in total output is very small. A single buyer and seller cannot influence the price through his action.
Homogeneous product
The products of various firms are exactly identical to one another. They are the perfect substitutes for one another.
Free entry and exit
There is no legal restriction for new firms to enter and old firms to exit from the industry.
Perfect knowledge
Knowledge of the buyers and sellers regarding market conditions such as price and commodity is known as perfect knowledge in perfect competition both buyers and sellers are fully aware of their current price in the market.
Perfect mobility
There is perfect mobility of the factors of production from one industry to another industry which gives them more remuneration. If fair wages are not paid to then the factor may shift to other firms.
No government’s regulations
There are no government regulations in the market. In the firm’s subsidies and taxes.
Absence of transport cost
In perfect competition, all firms are assumed to have equal competitive powers hence their elements of the transport cost difference are ruled out by assuming zero transport cost.
Profit maximization
The main objectives of the firms of an industry are the maximum profit in the business sectors.
Uniform price
A commodity is sold at uniform prices all over the market price is determined by the joint effort of buyers and sellers.