What is Perfect Competition ? Meaning ↓
Perfect Competition is a marketplace construction where at that topographic point is a perfect grade of contest as well as unmarried cost prevails.
The concept of Perfect Competition was introduced past times Dr. Alfred Marshall.
Image Credits © Welker's Wikinomics.
Nothing is 100% perfect inwards this world. So, this states that perfect contest is alone a theoretical possibility as well as it does non be inwards reality.
Main Features of Perfect Competition ↓
The next are the characteristics or nous features of perfect contest :-
1. Many Sellers
In this market, at that topographic point are many sellers who cast full of marketplace supply. Individually, seller is a trace of piece of occupation solid as well as collectively, it is an industry. In perfect competition, cost of commodity is decided past times marketplace forces of need as well as supply. i.e. past times buyers as well as sellers collectively. Here, no private seller is inwards a pose to alter the cost past times controlling supply. Because private seller's private provide is a really small-scale run of full supply. So, if that seller lonely raises the price, his production volition larn costlier than other as well as automatically, he volition endure out of market. Hence, that seller has to possess got the cost which is decided past times marketplace forces of need as well as supply. This ensures unmarried cost inwards the marketplace as well as inwards this way, seller becomes cost taker as well as non cost maker.
2. Many Buyers
Individual buyer cannot command the cost past times changing or controlling the demand. Because private buyer's private need is a really small-scale run of full need or marketplace demand. Every buyer has to possess got the cost decided past times marketplace forces of need as well as supply. In this way, all buyers are cost takers as well as non cost makers. This too ensures beingness of unmarried cost inwards market.
3. Homogenous Product
In this case, all sellers create homogeneous i.e. perfectly identical products. All products are perfectly same inwards terms of size, shape, taste, colour, ingredients, quality, merchandise marks etc. This ensures the beingness of unmarried cost inwards the market.
4. Zero Advertisement Cost
Since all products are identical inwards features similar quality, taste, blueprint etc., at that topographic point is no reach for production differentiation. So promotion cost is nil.
5. Free Entry as well as Exit
There are no restrictions on entry as well as move out of firms. This characteristic ensures beingness of normal net turn a profit inwards perfect competition. When net turn a profit is more, novel firms come inwards the marketplace as well as this leads to competition. Entry of novel firms competing amongst each other results into growth inwards provide as well as autumn inwards price. So, this reduces net turn a profit from abnormal to normal level.
When net turn a profit is depression (below normal level), some firms may move out the market. This leads to autumn inwards supply. So remaining firms heighten their prices as well as their profits move up. So over again this ensures normal flat of profit.
6. Perfect Knowledge
On the forepart of both, buyers as well as sellers, perfect cognition regarding marketplace as well as pricing weather condition is expected. So, no buyer volition pay cost higher than marketplace cost as well as no seller volition accuse lower cost than marketplace price.
7. Perfect Mobility of Factors
This characteristic is essential to continue provide at par amongst demand. If all factors are easily mobile (moveable) from 1 trace of production to another, thus it becomes slowly to conform provide equally per demand.
Whenever need is to a greater extent than additional factors should endure moved into manufacture to growth provide as well as vice versa. In this way, amongst the help of stable need as well as supply, nosotros tin laissez passer on the sack hold unmarried cost inwards the Market.
8. No Government Intervention
Since marketplace has been controlled past times the forces of need as well as supply, at that topographic point is no regime intervention inwards the cast of taxes, subsidies, licensing policy, command over the provide of raw materials, etc.
9. No Transport Cost
It is assumed that buyers as well as sellers are to a greater extent than or less market, thus at that topographic point is no carry cost. This ensures beingness of unmarried cost inwards market.
