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are variable. In the long run, firms are able none of them is in a position to influence
to adjust all costs. It is for a few years, the price in the market.
generally up to five years.
2) Homogeneous product : An important
4) Very long period : Very long period is feature of a perfectly competitive market
a production time that is so long that all is that the product sold is homogeneous or
inputs are variable. It is of more than five identical in respect of size, design, colour,
years. taste etc. All the products are perfect
III) On the basis of Competition : substitutes to each other.
Competition among the sellers and buyers is 3) Free entry and exit : There are no barriers
the most important criteria for classification of to the entry and exit of firms. Any firm can
markets in economics. Let us study the various enter or quit the industry at its own will. If
types of markets on the basis of competition there is hope of profit, the firm will enter the
among the sellers : market and if there is possibility of loss the
A) Perfect Competition : firm will leave the market.
Meaning and Definition : Perfect 4) Single price : A single uniform price
competition is an ideal and imaginary prevails under perfect competition which
concept of market rather than an actual is determined by the interaction of demand
market. According to Mrs. Joan Robinson, and supply.
“Perfect competition prevails when the 5) Perfect knowledge of market : The buyers
demand for the output of each producer is and sellers possess a perfect knowledge
perfectly elastic.” about the market conditions. Every seller
A perfectly competitive market is and buyer has the knowledge about price,
one in which the number of buyers and quality, source of supply of products etc.
sellers is very large. All the buyers and 6) Perfect mobility of factors of production :
sellers are engaged in buying and selling There is perfect mobility of factors of
a homogeneous product without any production under perfect competition.
restrictions. Moreover both buyers and Labour and capital are mobile not only
sellers possess perfect knowledge of market geographically but also occupationally.
conditions.
Following are the features of Perfect 7) Absence of transport cost : In perfect
competition, price is uniform because we
Competition :
assume that transport cost does not exist.
1) Large number of sellers and buyers : This assumption will lead to uniformity in
Under perfect competitions, there are large price.
number of sellers and buyers. As mentioned 8) No government intervention : Laissez-
earlier, each seller forms a negligible part faire policy is an important feature of
in the total market. Hence, none of them perfect competition. It means there is
is in a position to influence the price and absence of Government intervention in
supply in the market. Thus, sellers are price economic activities.
takers under perfect competition.
The number of buyers is also large. The Price determination under Perfect Competition:
share of each buyer is so negligible that The interaction of demand and supply
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