Question

What is meant by Perfect Competition Market?

Hint:

In a perfect competition market, the demand curve for an individual firm is perfectly elastic (a horizontal straight line), meaning they can sell any quantity at the prevailing market price.

Answer 1

Step 1: Understanding the Concept:
It is an ideal market form where no individual buyer or seller can influence the price of the product.
Step 2: Detailed Explanation:
Key features include:
1. Homogeneous Product: All products sold are identical in quality, shape, and size.
2. Price Takers: Individual firms must accept the price determined by industry demand and supply.
3. Perfect Knowledge: All buyers and sellers have full information about prices and product quality.
4. No Transport Costs: It is assumed that there are no costs for moving goods.
5. Free Entry/Exit: Firms can enter or leave the industry without any barriers.
Step 3: Final Answer:
Perfect competition is a theoretical market model where identical products are sold by numerous sellers at a uniform market price.