Features of Perfect Competition

Perfect competition is a type of market structure which is characterized by large number of buyers and seller which sells homogeneous product and therefore have not much pricing power. Given below are the features of perfect competition –

  1. Pricing – In perfect competition pricing of a product is decided by the market forces of demand and supply and therefore there is no individual firm or company which can set its own price and hence in perfect completion firms of individuals are price takes rather than price makers as in the case of monopoly.
  2. Large Number of buyers and Sellers – There are large number of buyers and sellers in this type of market, buyers are willing to buy a product at particular price and sellers sells homogenous product at price which is fixed which results in buyers switching to other seller if he or she finds price of the product to be high as compared to other seller.
  3. Advertisement expense – Since there is no pricing power and products are not differentiated there is no need for advertising your product to customers as product will be sold if one keeps the price as decided by the market forces.
  4. Perfect Knowledge – In perfect competition both buyer and seller have complete knowledge about the product features like quality, quantity and the price and therefore there is no exploitation of either buyer or seller.
  5. Entry and Exit – There is no restriction on entry and exit of firms under this market structure and therefore any firm can enter or exit which in turn helps in curbing any monopoly like situation arising.
  6. Homogenous product – The reason why perfect competition is into existence is because of homogenous product which has close substitutes, because if product is different than firms producing different products will charge different prices from customers because of differentiated products.
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