Differentiate between pure and perfect competition
Answers
Explanation:
Pure competition is a market situation where there is a large number of independent sellers offering identical products. It means it is a term for an industry where competition is stagnant and relatively non-competitive. Companies within the pure competition category have little control of price or distribution of products. Pure competition is said to exist in a market where-
Pure competition
Meaning:
Pure competition is a market situation where there is a large number of independent sellers offering identical products. It means it is a term for an industry where competition is stagnant and relatively non-competitive. Companies within the pure competition category have little control of price or distribution of products.
Pure competition involves-
Very large number
Standardized product
Price Takers
Free entry and exit
A very large number– a very large number of independently acting sellers, e.g., farm product, stock market, foreign exchange market.
DEFINITION
The purely competitive markets are used as the benchmark to evaluate market performance. It is generally believed that market structure influences the behavior and performance of agents with in the market. Structure influences conduct which, in turn, affects performance.
Pure competition and Monopoly are at each end of the spectrum of markets. In fact probably neither occur in market economies. Pure competition and monopoly are the boundaries and the “real world” (wherever that is) lies somewhere between the two extremes. Pure competition provides the benchmark that can be use to evaluate markets. The physician who attends you knows that 98.6o is a benchmark.
Meaning:
Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price. Thus perfect competition is an ideal form of market structure in which there is the greatest degree of competition. A perfectly competitive market is one in which economic forces operate unimpeded.
Differentiate between pure and perfect competition:
- Pure competition is more practical and realistic compared to perfect competition.
- There is no concept of monopoly in pure competition but in perfect competition, there is the same factor of monopoly.
- Pure competition has other costs involved and there is no cost involved in perfect completion.
- Pure competition is lesser restrictive that perfect competition.
- There is freedom of entry and exit for firms in pure competition with homogenous products.
The main aspect of the difference between pure and perfect completion is the freedom of doing business and perfect competition involves the aspect of perfection in its elements of doing business.
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