Characteristics Of Perfect Competition
Singular Product
The prime characteristic of perfect competition is the existence of one single product that is sold by all suppliers at a common price, with the quality of the product being the same. This implies that the product is purchased from a supplier does not affect the buyers because of its same price and quality.
Innumerable Buyers and Sellers
The number of buyers and sellers in the market are infinite. Since only one product is being sold in the market, no single buyer or a seller can determine or influence the price of the product. The price is determined by the market as a whole, depending on the total demand and requisite supply of the product in question. For instance, the process of producing or growing wheat is similar, and so is the final product. As such, wheat prices are usually similar everywhere. Only a drastic change in the demand and supply of wheat can cause its prices to be altered.
Clarity of Information
This is another characteristic of perfect competition. The buyers are completely aware of and are exposed to information about the production process and its economics. Thus, the market conditions are known to everyone, and this knowledge causes the price to remain constant among all suppliers.
Costless Transactions
Neither the buyers, nor the sellers incur any costs in the transactions that occur among them. That is to say, that when a buyer buys, he does not incur any cost apart from the cost of the product, where similarly, the supplier does not incur any cost while selling the product to the buyer. This is known as perfect mobility.
Maximum Profits
In a perfect competition, suppliers only aim for profit maximization. They are not concerned with customer retention and revenue maximization. Profit maximization is determined by the quantity of product they sell. When the marginal cost, or the cost incurred by the production of a single unit of the product is equal to the marginal revenue, that is the revenue
The prime characteristic of perfect competition is the existence of one single product that is sold by all suppliers at a common price, with the quality of the product being the same. This implies that the product is purchased from a supplier does not affect the buyers because of its same price and quality.
Innumerable Buyers and Sellers
The number of buyers and sellers in the market are infinite. Since only one product is being sold in the market, no single buyer or a seller can determine or influence the price of the product. The price is determined by the market as a whole, depending on the total demand and requisite supply of the product in question. For instance, the process of producing or growing wheat is similar, and so is the final product. As such, wheat prices are usually similar everywhere. Only a drastic change in the demand and supply of wheat can cause its prices to be altered.
Clarity of Information
This is another characteristic of perfect competition. The buyers are completely aware of and are exposed to information about the production process and its economics. Thus, the market conditions are known to everyone, and this knowledge causes the price to remain constant among all suppliers.
Costless Transactions
Neither the buyers, nor the sellers incur any costs in the transactions that occur among them. That is to say, that when a buyer buys, he does not incur any cost apart from the cost of the product, where similarly, the supplier does not incur any cost while selling the product to the buyer. This is known as perfect mobility.
Maximum Profits
In a perfect competition, suppliers only aim for profit maximization. They are not concerned with customer retention and revenue maximization. Profit maximization is determined by the quantity of product they sell. When the marginal cost, or the cost incurred by the production of a single unit of the product is equal to the marginal revenue, that is the revenue