ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In economic theory, perfect competition occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices.

Detailed explanation-2: -In a free market system, buyers and sellers interact in a market to set prices. When the market is characterized by perfect competition, many small companies sell identical products. Because no company is large enough to control price, each simply accepts the market price. The price is determined by supply and demand.

Detailed explanation-3: -Perfect Competition-Buyers and sellers sell identical products (there is no need for advertising).

Detailed explanation-4: -In monopolistic competition, we still have many sellers (as we had under perfect competition). Now, however, they don’t sell identical products. Instead, they sell differentiated products-products that differ somewhat, or are perceived to differ, even though they serve a similar purpose.

Detailed explanation-5: -In case of perfect competition, products of all firms in the industry are perfect substitutes of each other, that means the goods of the perfectly competitive market are identical.