Question

I need a news article within the month of November 2019 that discusses perfect competition and summarize key points

Answer 1

Today we will discuss price and output determination under perfect competition. Before that let us see what is market. Market refers to the arrangement where buyers and sellers are in contact with each other for the purchase and sale of goods or services.

Markets can be classified into many categories based on:

a. Number of buyers and sellers

b. Nature of commodity

c. Mobility of goods and factors of production

d. Knowledge about market conditions

e. Freedom of entry and exit of firms.

And based on the above criteria, markets can be classified into four, such as, perfect competition, monopoly, monopolistic competition and oligopoly. Let's discuss now Monopolistic competition in detail.

Perfect competition is a market situation,in which very large number of buyers and sellers operate freely and the commodity is sold at a uniform price. It is an extreme form of market which rarely exist in practice. The word " perfect competition" is used in economics with a different meaning.It is a market structure where there is no competion and there is no nrivalry among the firms.

Features:

There will be a large number of buyers and sellers , homogeneous or undifferentiated or identical products, perrfect mobility of goods and factors of production, perfect knowledge of market conditions, freedom of entry and exit, absence of transport costs, uniform price, absence of government control, absence of selling cost- all these are the characteristic features of a perfectly competitive market.

The output sold under perfect competition will be homogeneous or identical. There will be no difference among the products. Their color, smell, size, quality etc will be same. Moreover, the buyers and sellers are price takers. That means, the buyers and sellers have to accept the existing price in the market. Neither the producer nor the consumer can influence the price. If a producer fixes a price above the market price, he will lose his consumers. As the producer gets only normal profit he will not sell the product for a price less than the market price.

As far as a consumer is concerned, he wants to buy things at the minimum price. Goods will not be available to the consumer at a price lower than the market price.

In short, under perfect competition, price of goods will always  be equal to market price. At this price any quantity of a commodity will be available for sale and purchase in the market. Therefore, the price of every unit of a product sold by the producer will be the same. The producer is ready to sell any quantity at the market price and the consumer is ready to buy it at that price. So every producer and every consumer under perfect competition is called a price taking producer and a price taking consumer respectively.

Let us summarize: In a perfect competition market there will be a number of firms, buyers and sellers, homogeneous products and free entry and exit into the market. So which one will we point out as the best example of a perfect market? Yes, it is the agricultural market!!