Economics – Different market structures | e-Consult

Perfect competition is a theoretical market structure characterized by the following key features:

• Large number of buyers and sellers: No single buyer or seller has enough market power to influence the market price.
• Homogeneous product: The products offered by all firms are identical, making them perfect substitutes.
• Free entry and exit: There are no significant barriers to entry or exit for firms.
• Perfect information: All buyers and sellers have complete and accurate information about prices and product quality.
• Price takers: Individual firms must accept the market price determined by the overall supply and demand, as they cannot influence it.

These characteristics lead to a perfectly competitive market where resources are allocated efficiently.