14. Explain the main characteristics of a perfect competitive market?
Answers
Answer:
The characteristics of perfect competitive market are:
1. Homogeneous Product
The product that is offered for sale in this market is homogeneous in nature.
2. Free Entry and Exit
There is free entry and exit for the firm under perfect competition. So, the firms in the perfect competition could make normal profit and vice versa.
3. Identical Price
Due to homogeneous nature of the product, the price of product is also same in perfect competition.
4. Perfect Knowledge
The consumers and sellers are completely aware about the price, quality and quantity of products.
5. Firm is Price Taker
Under perfect competition, the firm is only a small unit of the whole market. Hence, it plays no role in determination of price. Therefore, the firm is price taker whereas the industry is a price maker.
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