Question

what is meant by classical perfect Market ?

Answer 1

Classical perfect market is the one which has the following features:

1. All firms sell identical/homogeneous products.

2. There are a large number of buyers and sellers.

3. Firms are price takers. Price is determined by market demand and supply conditions.

4. Consumer behaves rationally i.e. maximization of utility at every level.

5. There exists perfect knowledge.

6. There are no barriers to entry/exit of new firms.

7. There are no externalities.

8. Government has no role to play in any form what so ever.