Question

Explain the implications of the feature 'homogeneous products' in perfectly competitive markets.

Answer 1

Homogeneous products imply that the products are identical in quality, shape, size and colour. So, no producer is in a position to charge a different price of the product it produces. A uniform price prevails in the market. In a perfectly competitive market, commodity is homogeneous (identical). Thus, the buyers find no reason to prefer the product of one seller to the product of another. Hence the firms are price takers.