Explain the salient feature of perfect competition?

The concept of perfect completion was first introduced by Adam smith. Later on, it was improved by edge worth. However it receives “complete form due to efforts made by frank kight.

By perfect completion, we mean a market structure, where the completion is completed in all respect. In this market a uniform price prevail during a particular period of time.

Condition/assumption/characteristic/feature of perfect completion:

1.                 Large number of buyers:

In a perfect completion there are large numbers of buyers. A single buyer cannot affect market price, with the single buyer purchase more or purchase less. He therefore too like firm is a price taker.

2.                 Large number of sellers:

There are large numbers of firms in the industry. Whether a particular firm sells more or less it does not affect the market price. The shares of each firm in the total supply of goods, like a drop in the ocean i.e. why a firm has no control over the price.

3.                 Homogenous products:

All the firms produces homogenous product in a perfect competitive market. A buyer cannot differentiate among the products produced by different firms, and hence pay a uniform price for the goods produced by different firms.

4.                 Perfect knowledge:

The buyers and sellers have perfect knowledge about the prevailing condition in the market. Neither the sellers can deceive buyers nor can deceived sellers. The consumers know the produced cost. The workers know about wage rates and so on salient feature of perfect completion.

5.                 Indifference of consumers:

In perfect competition the consumers is indifferent. A consumer gives no importance to the product of Particular firm. So every consumer pays the same price for the products produced by different firms.

6.                 Perfect mobility by the resource of production:

There is no restriction on the mobility of the resource of production. They can move from one firm to another.

7.                 Free entry and exit by all the firms:

In perfect competitive market the doors is open. There are no barriers on the entrance of new firms. Similarly there are also no barriers on the exit existing firms.

8.                 Determination of price:

In a perfect competition market, price is determined by the market force of demand and supply. Every firm will charge the price determine by the equality of demand and supply force.