ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Perfect competition describes an imaginary market condition where all consumers have access to the same products and information. In this type of economy, all firms must offer the lowest price possible or risk being undercut by their competitors.

Detailed explanation-2: -Agricultural markets are examples of nearly perfect competition as well. Imagine shopping at your local farmers’ market: there are numerous farmers, selling the same fruits, vegetables and herbs. You can easily find out the prices for the goods, but they are usually all about the same.

Detailed explanation-3: -Pure or perfect competition is a market structure defined by a large number of small firms competing against each other. A single firm doesn’t have significant marketing power, and as a result, the industry produces an optimal level of output because firms don’t have the ability to influence market prices.

Detailed explanation-4: -Perfect Competition-Buyers and sellers sell identical products (there is no need for advertising).

Detailed explanation-5: -In a perfectly competitive market: all firms sell an identical product; all firms are price-takers; all firms have a relatively small market share; buyers know the nature of the product being sold and the prices charged by each firm; the industry is characterized by freedom of entry and exit.