Assumptions of Perfect Competition

A perfect competition is market structure where there are large number of buyers and sellers who are willing to buy or sell a product or service at a given price. A Mobile SIM card is an example of perfect competition where there are many companies which are there to sell these cards at a given price. Let’s look at some of the assumptions of perfect competition –

  1. Under perfect competition market structure there are large number of buyers as well as sellers for a given product or service.
  2. The price of a product or service is fixed and buyers who are willing to buy at that price can buy the product or service and sellers who are willing to sell the product or service at that price can sell it.
  3. The product or service which is being sold under perfect competition market structure is similar or Homogeneous and that is the reason why sellers do not have any control over the price of a product.
  4. Under perfect competition there are no entry and exit barriers which make it easy for companies to enter into the markets and sell the product or service.
  5. All the buyers and sellers have complete information about the product or service which is being sold in the market.

In real life situations perfect competition market is seldom found as above assumptions may not hold in markets all over the world.

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