Question #a505c
1 Answer
Perfect competition is a market where there are infinite number of buyers and sellers. No single buyer or seller is big enough to have any appreciable influence over market price.
Explanation:
There are a large number of buyers and sellers in a perfectly competitive market.
There will be only one industry in the competitive market. A firm is a constituent part of an industry. All the firms are producing homogeneous products. .
The price is determined by market forces namely the demand for and the supply of the product. Hence single price is ruling in the market
The products produced by all the firms in the perfectly competitive market must be homogeneous and identical in all respects.
Both buyers and sellers are fully aware of the current price and possess perfect knowledge about market conditions.
There is complete freedom for the entry of new firms into the industry or the exit of the existing firms from the industry.
The factors of productions are free to move from one use to another. In other word, there is free mobility of factors.
In a perfectly competitive market, it is assumed that there are no transport costs.
