ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. Companies earn just enough profit to stay in business and no more. If they were to earn excess profits, other companies would enter the market and drive profits down.

Detailed explanation-2: -Perfect competition markets are highly competitive markets in which many sellers are competing to sell their product. Each seller produces a product that has no unique characteristics so buyers “don’t care” about which seller’s product to buy.

Detailed explanation-3: -In a perfectly competitive market, buyers and sellers possess perfect knowledge. This implies that no firm can charge a different price and no buyer is willing to pay a higher price for the same commodity. Sellers are completely aware of the prices prevailing in the market.

Detailed explanation-4: -Perfect competition is a type of market where there are many buyers and sellers, and all of them initiate the buying and selling mechanism. There are no restrictions and no direct competition in the market as all the sellers are assumed to sell identical or homogenous products.

Detailed explanation-5: -In a perfect competition market structure, there are a large number of buyers and sellers. All the sellers of the market are small sellers in competition with each other. There is no one big seller with any significant influence on the market. So all the firms in such a market are price takers.