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What Are The Characteristics Of A Perfect Competitive Market?

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Question No.1: What are the characteristics of a perfectly competitive market? The perfect competitive market is a description of a market where no participants are large enough to have the market power to set the price of a homogeneous product; this is because the conditions set for perfect competition are strictly applied. Realistically speaking, there are very few, if any, perfectly competitive markets. The closes comparison would be the buyers and sellers in some auction markets or for financial assets, which approximate the concept. The perfect competitive market serves as a natural benchmark against which to contrast other markets. A perfectly competitive market exhibits the following characteristics: Existence of a large number of buyers and sellers There are a very large numbers of firms in the market catering to a large audience/customer base. Each seller in a perfectly competitive market place contributes a mere fraction of the market’s overall supply, making it impossible to influence change in market prices regardless of increasing or decreasing supply. An example would be a rice farmer in Sri Lanka whose contribution or output is negligible when considering the island’s total rice production. Homogenous products Firms produce either similar or identical products/units in similar quantities – which fall under the category of homogenous product. Most firm’s output are not branded, and the ones that are have very similar branding (e.g. rice, eggs, fresh milk

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