Perfect competition market is one of the types of markets and this market exists only in books, not in real life because nothing is perfect, everyone has something imperfect, the same concept applies in the market as well. This market is made up of imaginary ideas and has no existence in reality.
According to perfect competition market, a large number of buyers and sellers are available in the market and sellers sell homogeneous goods and services to buyers, and all consumers have complete information about the goods and services such as price, quality, quantity, color, etc., and all sellers earn just enough profit to survive in the market.
Table of Contents
What is a Perfect Competition Market?
Meaning of Perfect Competition Market:
Perfect competition is a market situation in which there are a large number of buyers and sellers, and all the sellers sell homogeneous products. In this competition market, all consumers have perfect knowledge about the goods and services. Any firm can enter or exit this market without any prior notice as there is no mandatory structure for entry and exit of firms.
In perfect competition market, everything is perfect like price, goods, knowledge, etc. If anything is imperfect in a perfect competition market then it will not be called a perfect competition market.
Definition of Perfect Competition Market:
According to Boulding – “Perfect competition market is a situation where a large number of buyers and sellers are engaged in the purchase and sale of identically similar commodities, who are in close contact with one another and who buy and sell freely among themselves.”
According to Ferguson – “Perfect competition describes a market in which there is complete absence of direct competition among economic groups.”
According to Professor Lim Chong Yah – “Perfect competition is a market situation where there is a large number of sellers and buyers, a homogeneous product, free entry of firms into the industry, perfect knowledge among buyers and sellers of existing market conditions, and free mobility of factors of production among alternative uses.”
Features of Perfect Competition Market
Following are the features of perfect competition market.
1. Large number of buyers and sellers:
In perfect competition market, there are a large number of buyers and sellers because a perfect competition market is formed only when a large number of buyers and sellers are available. If large number of buyers and sellers are not available, then it is not called a perfect competition market.
2. Homogeneous Products:
Homogeneous products are another feature of a perfect competition market because all sellers sell similar types of goods and services to buyers in the market. There is no change in quantity, quality, price etc. of the product. If there is even a small change in the products, then it does not come under this market.
3. Perfect Knowledge:
In perfect competition market, all buyers and sellers have perfect knowledge about the market and the product. If someone does not have perfect knowledge about the market and the product then he does not come under perfect competition market.
4. No restriction:
A perfect competition market is open to all sellers without any restrictions and any firm can freely enter and leave the competition. No one except the governing authority has the right to impose restrictions on entry and exit into this market.
5. Same price:
In perfect competition, the price of all goods and services is the same because in this competition the firm is the price taker and not the price setter. The firm has to keep the price of goods and services as per the market. If a firm keeps the price different from the market then it will not come under this market.
6. Independent Decision:
In this competition, anyone can freely decide to enter and exit the market, move the market from one place to another, etc. because in this market no restriction of any kind is imposed on anyone, if any kind of restriction is imposed on anyone then they will not come under this market.
7. Reduction in Cost of Sales:
Selling costs are low in perfect competition because all goods are identical, and all consumers have complete information about them. Therefore, costs like advertising are reduced.
8. Price Taker:
In this market the sellers are bound by the market to determine/set the price because all the sellers set the price as per the market standards, no one can set the price independently, if someone sets the price independently then he does not come under this market.
9. Perfect Mobility:
In a perfectly competitive market, there is perfect mobility over goods, services, and resources,
10. Less Government Interference:
The main objective of perfect competition is to have free trade, that is why no one can interfere in this market, but to some extent the governing authority can interfere in this market to protect the rights of consumers and sellers.
Read Also:
- What is market? Meaning, features and more.
- Types of market
- What is a monopoly market? Meaning, features and more.
- What is a monopolistic competition market? Meaning, features, and more.
- What is a duopoly market? Meaning, characteristics, and more.
- What is an oligopoly market? Meaning, features, and more.
- What is oligopsony market? Meaning, features and more.
- What is a monopsony market? Meaning, features, and more.
- What is bilateral monopoly market? Meaning, features, and more.
- What is duopsony market? Meaning, features, and more.
QNA/FAQ
Q1. What is a perfect competition market?
Ans: Perfect competition is a market situation in which there are a large number of buyers and sellers, and all the sellers sell homogeneous products. In this competitive market, all consumers have perfect knowledge about the goods. To some extent, the vegetable market can be called a perfect competition market.
Q2. Does perfect competition market really exist?
Ans: No, this market exists only in books, not in real life because nothing is perfect, everyone has something imperfect, the same concept applies in the market as well.
Q3. Write the features of perfect competition market.
Ans: Following are the features of perfect competition market.
1. In perfect competition market, there are a large number of buyers and sellers.
2. In perfect competition market, all sellers sell homogeneous products.
3. In perfect competition market, buyers have perfect knowledge.
4. In perfect competition market, there are no restrictions on entry and exit.
5. In perfect competition market, all products have the same price.
6. In perfect competition market, sellers take independent decisions.
7. In perfect competition market, selling costs are lower.
8. In perfect competition market, sellers are price takers.
9. In perfect competition market, perfect mobility is found.
10. In perfect competition market, there is less government interference.
