Question

Explain any four features of perfect competition.

Answer 1

Four features of perfect competition are:-
1) Under perfect competition, there are so many buyers and sellers that no individual buyer or seller can influence the price of the commodity in the market. Any change in the output supplied by a single firm will not affect the total output of the industry. No individual buyer can influence the price of the commodity by his decision to vary the amount that he would like to buy, i.e.,price of the commodity is given to the buyer. He is a price-taker having no bargaining power in the market

2) The industry is characterized by freedom of entry and exit of firms. In a perfectly competitive market, there are no barriers to entry or exit of firms.

3) It possess perfect knowledge. This means both buyers and sellers are fully informed about the market price. Therefore, no firm is in a position to charge a different price and buyers will not pay a higher price. As a result, a uniform price prevails in the market.

4) Due to homogeneous product or identical in every respect like quantity, colour, size and shape, etc. The producers are perfect substitutes of one another. As a result both buyers and sellers have perfect knowledge, about the inputs used in production.