The characteristics of a
Explanation of Solution
Perfectly competitive market is the market in which there are a large number of buyers and sellers. Each buyer and seller individually has no control over the market. The market forces determine the market
Following are the features of a perfectly competitive market.
a. Free entry and exit: In a perfectly competitive market, there is no restriction on firm’s market entry and exit. If the existing firms make profits, then new firms will enter the market. On the other hand, a firm can freely exit the market if it incurs losses.
b. Large number of buyers and sellers: In a perfectly competitive market, there are a large number of buyers and sellers. Each buyer and seller has no influence over market price of the good.
c. Homogeneous goods: The products produced and sold by a perfectly competitive firm are identical. This means that products of a perfectly competitive firm are perfect substitutes for each other.
d. Perfect knowledge: The buyers and sellers in a perfectly competitive market have perfect market information. This means buyers and sellers have complete information about the price prevailing in the market.
e. Perfect mobility of factors of production: In a perfectly competitive market, factors of production are completely mobile leading to factor-price equalization throughout the market.
Introduction:
Perfectly competitive market is the market in which there are a large number of buyers and sellers. Each buyer and seller individually has no control over the market. The price in this market is determined by
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