Conditions/ Assumptions/ Features/ Characteristics Of Perfect Competition

by • 02/07/2011 • B.COM PART 1 EconomicsComments (0)788


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.

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