Perfect competition (also called pure competition) is a market configuration in which large number of members sell and buy homogeneous products, there are no hurdles to entry, an individual firm has no control over the price, and there is no non-price competition (for example publicity).
What is 'Perfect Competition?'
Perfect competition is a market structure in which the following five standards are met: 1) All firms retail an same product; 2) firms are just price takers - they cannot regulator the market price of their creation; 3) All firms have a comparatively small market share; 4) Purchasers have whole information about the product being retailed and the prices indicted by each firm; and 5) The business is branded by freedom of entrance and departure. Perfect competition is sometimes denoted to as "pure competition".
Perfect competition defines a market structure where competition is at its highest conceivable level. To make it more perfect, a market which exhibits the following features in its structure is said to show perfect competition:
1. Large number of purchasers and traders
2. Similar product is shaped by every firm
3. Freedom of entrance and departure of firms
4. Zero publicity cost
5. Customers have perfect information about the market and are well conscious of any modifications in the market. Customers spoil in rational choice making.
6. All the features of manufacture, viz. labor, money, etc., have perfect mobility in the market and are not delayed by any market issues or market forces.
7. No government involvement
8. No transport prices
9. Every firm makes usual profits and no firms can earn super-normal earnings.
10. Each firm is a price taker. It takes the price as definite by the forces of demand and supply. No firm can affect the price of the merchandise.
Depiction: Preferably, perfect competition is an imaginary situation which cannot perhaps happen in a market. Though, perfect competition is used as a base to compare with other practices of market structure. No industry displays perfect competition in India.
March 09, 2018