Perfect Competitive Market
Perfect competitive market
There are two sides to every market. Supply and demand. In this market no single seller would be able to influence a price hike. In other words, sellers are compelled to adhere to market rules.
Number of sellers
There are a large number of small firms and buyers in perfect competition. In other words in a perfect competitive market, buyers do not see differences between the products of the one firm and another.
Nature of product
All sellers bring homogeneous products to the market. Perfectly competitive firm produces and sells homogeneous product. In this market all the firms' goods or services are identical.
Close substitutes
In a perfect competitive market any good or any service that can be used instead of another. All goods or service are close substitutes.
Any good or any service that can be used instead of another. For example, bread is substitute for pasta or coke is a substitute for pepsi. Different goods that at least partly satisfy the same needs of the consumers and therefore, can be used to replace one another. Price of such goods shows positive cross-elasticity of demand. Thus, if the price of one goods goes up the sales of the other rise and vise versa. Everything can be exchanged and substituted with everything. Consumer goods can substitute to each other
There are two sides to every market. Supply and demand. In this market no single seller would be able to influence a price hike. In other words, sellers are compelled to adhere to market rules.
Number of sellers
There are a large number of small firms and buyers in perfect competition. In other words in a perfect competitive market, buyers do not see differences between the products of the one firm and another.
Nature of product
All sellers bring homogeneous products to the market. Perfectly competitive firm produces and sells homogeneous product. In this market all the firms' goods or services are identical.
Close substitutes
In a perfect competitive market any good or any service that can be used instead of another. All goods or service are close substitutes.
Any good or any service that can be used instead of another. For example, bread is substitute for pasta or coke is a substitute for pepsi. Different goods that at least partly satisfy the same needs of the consumers and therefore, can be used to replace one another. Price of such goods shows positive cross-elasticity of demand. Thus, if the price of one goods goes up the sales of the other rise and vise versa. Everything can be exchanged and substituted with everything. Consumer goods can substitute to each other