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Write Short Answer for the Following Question :Features of Pure Competition. - Economics

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Write short answer for the following question :

Features of Pure Competition.

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Solution

Pure competition is a part and parcel of perfect competition. According to Chamberlin, "a market becomes pure when monopoly is kept away."

Pure competition has certain conditions of perfect competition. They are

1)       Large number of sellers

2)       Large number of buyers

3)       Free entry and exist

4)       Homogeneous product

5)       Single Price

1)  Large number of sellers/sellers are price takers

There are many potential sellers selling their commodity in the market. Their number is so large that a single seller cannot influence the market price because each seller sells a small fraction of total market supply. The price of the product is determined on the basis of market demand and market supply of the commodity which is accepted by the firms, thus seller is a price taker and not a price maker.

2)      Large number of buyers:

There are many buyers in the market. A single buyer cannot influence the price of the commodity because individual demand is a small fraction of total market demand.

3)      Free entry and exit:

New firms can enter and exit the market without any restrictions.

4)      Homogeneous product:

Firms produce and sell identical units of a given product, in purely

competitive market, i.e., units of a commodity produced by each of them is uniform, in respect of size, shape, colour, quality, etc. Thus commodities have perfect substitute for each other.

5)      Single price:

In Pure Competition all units of a commodity have uniform or a single price. It is determined by the forces of demand arid supply.

Concept: Market
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