What are the conditions of perfect competition?

We define a perfectly competitive market as a market which fulfils the six following conditions: 1) Large number of sellers and buyers. 2) Homogenous product: All of the goods sold within the market are identical. In other words, there is no product differentiation. 3) Free entry and exit: Firms are free to enter and exit the market as there are no entry or exit barriers. 4) Perfect information: Every individual and every firm within the market possesses perfect information, meaning that there is absolutely no uncertainty within the market. 5) Cheap and efficient transportation. 6) No government controls.A truly perfectly competitive market will never exist. All markets experience degrees of product differentiation, and all markets have barriers to entry and asymmetric information. As such, we use perfect competition as a benchmark to assess the degree of competition within a market.

EB
Answered by Ethan B. Economics tutor

3057 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What are the features of an imperfect or monopolistic market?


What is a balance of payments deficit and why might this be damaging to the economy?


How can an increase in government spending affect the economy?


What will happen to the UK economy if investment increases?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences