Perfect competition describes a market structure whose assumptions are extremely strong and highly unlikely to exist in most real-time and real-world markets. The reality is that most markets are imperfectly competitive.
Conditions/ Assumptions/ Features/ Characteristics Of Perfect Competition
Perfect competition is said to exist when the following conditions are satisfied.
- Number Of Sellers And Buyers Is Very Large:
The first condition is that there should be operating in market, a large number of sellers and buyers.
- Products are homogenous:
The second condition ensures that all firms producing goods which are accepted by consumer or buyers as homogenous or identical.
- Perfect Knowledge About Market:
Another assumption of Perfect competition is that the purchaser and sellers should be fully aware of the price that are being offered and accepted.
- Free Entry Or Exit:
The fourth condition of Perfect competition requires that there must be absolute freedom for the entry of exit of the firms, in the long-run.
- Mobilizes Of Factor Of Production:
Perfect mobility of factor of production is essential in order to enable the firms to adjust their supply to demand.
- No Externalities:
No externalities arising from production and/ or consumption which lie outside the market.