Perfect competition - this is a type of market, where an infinite number of vendors offer customers the same products at the same time have a free entry into the industry, uses general information about the price and the same the best technology.
Let us consider in detail every part of this definition.
Thus, the conditions of perfect competition:
1) on the market to be a significant amount of both sellers and buyers of the product.Under this condition, no buyer and no seller can not alone influence the market balance, that is the appropriate authority, no one would.All subjects are fully subject to market forces.
2) involves the sale of the same, standardized products.Examples of such goods: grain or flour of one class, sugar, etc.In such circumstances, buyers would have no reason to prefer one or another product of the company - the same quality everywhere.
3) A seller may not affect the market price, since there is a large number of firms producing the same product.Perfect competition implies that each individual dealer will be forced to accept the price the market dictates.
4) there is no price competition as the quality of goods is homogeneous.
5) Consumers have access to information on prices.This means that if any manufacturer will decide unilaterally to raise the price, then it will lose its customers.
6) Sellers are not able to collude and raise prices because there are too many on the market.
7) Perfect competition assumes that any seller can enter into this sector of the market and leave it at any time, since there are no barriers impeding.The new firm is created and closed without any problems.It is assumed that the size is quite small companies, so the business can be sold at any time.
Perfect competition is a market where individual sellers do not have the ability to influence the market price by changing the volume of production, as their share in the total market segment tends to zero.If the seller decides to reduce its volume of production and sales, the total market supply is negligible change.The seller has to sell its products at the current price, the same for the whole market.The demand curve for his commodity varies flexibly: if the seller set the price higher than the market, the demand drops to zero.And if you put a price lower than the market, it will grow to infinity, but the price can not be secure because of production costs.
elastic demand, but also does not mean that the seller will be able to indefinitely increase the volume of output at a fixed price.It can remain constant as long as the changes in the production volume of the seller did not have an impact on the production sector as a whole.
Perfect competition is an ideal market model based on the theory, which is not in real life.For products from different manufacturers have their differences, and the barriers to entry and exit from the industry clearly exist.
at about a perfect competition is presented in some agricultural markets, in an environment of small market traders, construction crews, a photo studio, retail kiosks, etc.They are all united by the similarity of an offer, a large number of competitors, negligible to small scale businesses, the need to work at the current price - that is, to reproduce many of the above conditions of perfect competition.Their example is very convenient to study the functioning, organization and logic of actions of small firms with a generalized and simplified analysis.In Russia and CIS countries, the situation is very common in small businesses close to perfect competition.
