Title: Perfect Competition Market | Economics
Headings: Perfect Competition Market | Economics
Perfect Competition Market | Economics
These are:
1. A homogeneous product:
2. Many sellers:
3. Perfect information:
4. Freedom of entry and exit:
Competition becomes imperfect for various reasons such as:
1. Costly information and mobility:
Opportunity cost of time:
Transport cost:
2. Heterogeneous consumer tastes:
3. Market price vs. administered price:
As Lipsey put it, “In markets other than perfect competition, firms set their prices and then demand determine sales. Changes in market condi­tions are signalled to the firm by changes in the quantity that the firm sells at its current administered price.”
4. Short-run price stability:
5. Other aspects of Imperfect Competition:
These are the following:
(i) Non-price competition:
(ii) Unexploited Economies of Scale:
(iii) Entry prevention:

Content: In this sense, firms are simply responding to market forces. The real commercial world is clearly different from the world implied by perfect competition. A perfectly competitive market is characterised by a large number of small firms that produce a homogeneous product. As a result, each firm is a price-taker and, in the long run, economic profit is equal to two. However, in many instances markets are characterised by a large number of small firms that produce a heterogeneous product. In fact, this type of market pervades our economy. This market structure is referred to as imperfect (monopolistic) competition. ADVERTISEMENTS: While perfectly competitive firms product a homogeneous product, firms in a monopolistically competitive market produce differentiated products. As a result, monopolistically competitive firms are able to exercise some degree of control over price, regardless of the source of the product differentiation.