Features of Perfectly Competitive Market
The following seven features characterize perfectly competitive free markets:
There are numerous buyers and sellers, none of whom has a substantial share of the market.
All buyers and sellers can freely and immediately enter or leave the market.
Every buyer and seller has full and perfect knowledge of what every other buyer and seller is doing, including knowledge of the prices, quantities, and quality of goods being bought or sold.
The goods being sold in the market are so similar to each other that no one cares from whom each buys or sells.
The cost and benefit of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.
All buyers and sellers are utility maximizers: tries to get as much as possible for as little as possible.
No external parties (such as the government) regulate the price, quantity or quality of any goods being bought and sold in the market.
The equilibrium point is the pint at which the amount of goods buyers want to buy exactly equal to the amount of goods sellers want to sell, and at which the highest price buyers are willing to pay exactly equals the lowest price sellers are wiling to take.
At this point a sellers finds a willing buyers and buyer finds a willing sellers
In an oligopoly market prices are set by explicit agreements or by implicit understanding. It is clear that in an oligopoly market social utility declines to the extent that prices are artificially raised above the levels that would be set by perfectly competitive market. Consumers must pay the unjust prices of the oligopolies, resources are no longer efficiently allocated and used, and the freedom of both consumers and potential competitors diminishes.
The monopoly market imposes unjustly high prices upon the buyer and generates unjustly high profits from the seller. Instead of maximizing...
Please join StudyMode to read the full document