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Question
Explain three features of Perfect competitive market.
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Solution
- Homogeneous products: In this market, enterprises sell homogeneous or identical products. Consumers perceive no difference in products given by different merchants on the market.
- Free entry and exit: There are no obstacles preventing new firms from entering the market. Similarly, there are no obstacles to leaving. Firms have the option to exit the market if they are unable to generate enough revenue to cover their costs.
- Large numbers and sellers: In this market, there exists a significant number of both buyers and sellers. No buyers or sellers have the power to influence the demand and supply, respectively.
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