📘 F.Y.B.Com Semester II Business Economics II
Q.1 What
is perfect competition? Explain the features of it in detail.
ANS:
✅ What is Perfect Competition?
Perfect Competition is a type of market where many sellers sell the same kind of product, and no one has the power to change the price. This idea started in the late 19th century and was developed more in the 1950s by economists like Léon Walras, Kenneth Arrow, and Gérard Debreu.
In simple terms, perfect competition is an ideal market situation. Though we rarely see it in real life, it helps us understand how prices work in a highly competitive environment. In such a market, sellers cannot set their own prices — they must accept the market price.
⭐ Features of Perfect Competition
Let’s look at the important features that define a perfectly competitive market:
1. 📈 Many Buyers and Sellers
There are a large number of buyers and sellers. No single buyer or seller can control the price. Each seller is just one among many, so they must accept the market price.
2. 📦 Identical (Homogeneous) Products
All firms sell the same type of product — like wheat, rice, or salt. Since the products are exactly the same, customers don’t care which seller they buy from. This means no firm can charge a higher price than others.
3. 🚪 Free Entry and Exit
Firms can enter or leave the market freely. If a firm makes extra profit, other firms will join the market. If it faces loss, it can leave without any problem. This mostly happens in the long run.
4. 🧠 Full Knowledge of Market
Buyers and sellers have complete information about prices and products. This helps them make better buying and selling decisions.
5. 🔄 Free Movement of Resources
Resources like labour and capital can move easily from one firm to another. This means workers or machines can shift wherever needed.
6. 🚚 No Transport Cost
It is assumed there is no transport cost, especially when products are sold in the same area where they are made — like farmers selling vegetables in the village market.
💬 Conclusion
Perfect competition is a theoretical market model. It’s rarely seen in real life but is important in economics to understand how prices and markets work. Its main features — like many sellers, same products, free entry and exit — make it unique and useful for learning how businesses and markets behave.
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