Explain in detail the features of perfect competition
Dear Student,
Features of perfect competition-
1) Large number of buyers and sellers- There are large number of buyers and sellers of the commodity under perfect competition, each too small to exert any influence on the price of the commodity by his/her actions.
2) Homogenous Products- The product of one firm is a perfect substitute of another firm's product. The homogeneity of the product refers not only to the 'physical characteristics' of the commodity such as size, design, etc but also to the 'environmental factors' such as location of the seller, credit facilities,etc.
3) Freedom of entry and exit - There are no restrictions - legal ,natural or man made on the entry of the new firms into and the exit of the old firm from the industry so that all firms end up earning only normal profit in the long run.
4) Perfect Mobility of Resources - This characteristic ensures that resources or factors of production can enter or quit a firm or the industry at will which means that resources are able to switch over from one use to another without any restriction.
5) Perfect Knowledge - Consumers, firms and resource owners have perfect knowledge about the Market conditions which would ensure that price differences are quickly eliminated and a single price for the commodity would ultimately prevail throughout the Market.
6) Absence of Transport costs - The buyers and sellers incur no transport costs in purchasing and selling goods. In other words, There is no cost of transportation.
Regards
Features of perfect competition-
1) Large number of buyers and sellers- There are large number of buyers and sellers of the commodity under perfect competition, each too small to exert any influence on the price of the commodity by his/her actions.
2) Homogenous Products- The product of one firm is a perfect substitute of another firm's product. The homogeneity of the product refers not only to the 'physical characteristics' of the commodity such as size, design, etc but also to the 'environmental factors' such as location of the seller, credit facilities,etc.
3) Freedom of entry and exit - There are no restrictions - legal ,natural or man made on the entry of the new firms into and the exit of the old firm from the industry so that all firms end up earning only normal profit in the long run.
4) Perfect Mobility of Resources - This characteristic ensures that resources or factors of production can enter or quit a firm or the industry at will which means that resources are able to switch over from one use to another without any restriction.
5) Perfect Knowledge - Consumers, firms and resource owners have perfect knowledge about the Market conditions which would ensure that price differences are quickly eliminated and a single price for the commodity would ultimately prevail throughout the Market.
6) Absence of Transport costs - The buyers and sellers incur no transport costs in purchasing and selling goods. In other words, There is no cost of transportation.
Regards