IGCSE,ECONOMICS,PERFECT COMPETTITION,0455
Forms of Market
1.Market
Market represents all the areas in which
buyers and sellers are in contact with each other for the purchase and sale of
the commodity.
Main Market forms
1.Perfect competition
Perfect competition is the market
situation in which there are a large number of buyers and sellers sell
homogeneous product and there is free entry and exit.
2. Features of perfect competition
a) A large number of buyers and sellers: Under perfect competition the number of buyers and
sellers in the market is so large that the decision taken by individual buyer
or seller can have no influence over the price.
b) Sellers are price takers: Sellers in perfect competition accepts the
price determined by the forces of demand and supply. Price mechanism determined
the price of the commodities therefore, sellers are price takers.
c)Homogeneous
products: The product in the market are identical in all respect- in size, shape,
colour, quality, packing etc. So there are no preference on products.
d)Mobility
of factors of production: There must be free mobility for factors of
production. This mobility stops the shortage and ensure uniform price for the
commodities in all part of the market.
e)Perfect
knowledge about market condition:Each buyer and seller under perfect completion
has complete knowledge about the present and future price of the commodities. This
will endure a single price throughout the market.
f)Freedom
of entry and exit: In a perfect competitive industry there is freedom of
entry and exit for firms. This ensure that there should be no restriction on
new firms entering into the field of production or the existing firms going out
of the field.
Advantages of Perfect competition
a)More production
b)Efficient production
c)Better utilisation of factors of
production
d)low cost of production and cheap and
better quality goods to the consumers.
e)More profit to the producers
f)Better reward for factors of
production
g)No advertisement cost
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