What is perfect competition? What are the features of Perfect competition?

Meaning: -A perfect competition is a market situation where there are large number of buyers and sellers buying and selling homogeneous products at single uniform price. Perfect competition is an idealistic concept and not a real one. Perfect competition may be applicable to certain products and that too for a certain period, and may be in a selective part of the market.

Features of perfective competition

1.      Large number of buyers and sellers: - There exist large number of buyers and sellers in a perfectly competitive market. The number of buyers and sellers are so large that a single buyer or a single seller can’t influence (manipulate) the price or output through his action.

2.      Homogeneous Product: - The products sold in market are homogeneous, that is identical in its taste, shape, size, colour, design, quality etc.

3.      Freedom of entry and exit: - There is freedom of entry and exit to the firms under perfectly competitive market. Any firm (buyer or seller) can enter the market or exit from the market as and when he wants.

4.      Perfect Knowledge: - Buyers and sellers must have a perfect knowledge about the market conditions. They should have complete information about the price at which goods are bought and sold and the place where the transactions take place etc.

5.      Perfect mobility of factors of production: - The Factors of production are perfectly mobile in the sense that they are completely free to move from one industry to another or from one market to another or from one occupation to another.

6.      Absence of transportation cost: - It is assumed that all the sellers are equally near or far away from the markets, and as such there are uniform transport coasts to all the sellers. So, it is assumed that the transport cost is absent or constant for all the sellers.

7.      Absence of Government Intervention: - There is no government intervention in respect of production, transportation and exchange of goods.

8.      Uniform price: - There exist a single uniform price in the market and it is determined by the forces of demand and supply.

9.      Demand curve of the Firm: -Since the firm is a price taker it can sell any amount of the commodity at the prevailing price. Thus the demand curve facing the horizontal line.