Perfect competition is a model of how a market could work if everything was just right. Even though it’s hard to find a market that fits this model exactly, many markets show some of these important features.
Many Buyers and Sellers: In a perfectly competitive market, there are lots of buyers and sellers. Think about farmers selling crops. If many farmers have similar products like wheat, no single farmer can change the price much. Each farmer only contributes a small amount to the total supply.
Similar Products: The items sold by different sellers are pretty much the same. For example, if you buy apples from different stands, they should all look and taste alike.
Easy to Join or Leave: In a perfectly competitive market, anyone can start or stop selling whenever they want. This means that if there’s a chance to make a lot of money, new sellers will come in to sell more, which can lower prices.
Everyone Knows Everything: All buyers and sellers know all the important details about prices and products. This helps everyone make smart choices.
Sellers Accept Prices: In a perfect competition, sellers can't set their own prices. They have to accept the market price. If a farmer tries to sell their apples for more, buyers will just go to another seller who has a better deal.
Even though perfect competition is more of a theory than something we see in real life, understanding these features helps us look at real markets in a better way.
Perfect competition is a model of how a market could work if everything was just right. Even though it’s hard to find a market that fits this model exactly, many markets show some of these important features.
Many Buyers and Sellers: In a perfectly competitive market, there are lots of buyers and sellers. Think about farmers selling crops. If many farmers have similar products like wheat, no single farmer can change the price much. Each farmer only contributes a small amount to the total supply.
Similar Products: The items sold by different sellers are pretty much the same. For example, if you buy apples from different stands, they should all look and taste alike.
Easy to Join or Leave: In a perfectly competitive market, anyone can start or stop selling whenever they want. This means that if there’s a chance to make a lot of money, new sellers will come in to sell more, which can lower prices.
Everyone Knows Everything: All buyers and sellers know all the important details about prices and products. This helps everyone make smart choices.
Sellers Accept Prices: In a perfect competition, sellers can't set their own prices. They have to accept the market price. If a farmer tries to sell their apples for more, buyers will just go to another seller who has a better deal.
Even though perfect competition is more of a theory than something we see in real life, understanding these features helps us look at real markets in a better way.