What is perfect competition explain its advantages and disadvantages?
Answers
Perfect competition market refers to those market in which large number of buyers and sellers are available. Homogeneous product are sold and its price determine d by market forces (demand and supply). In this market,buyers and seller have no control over price.
ADVANTAGE
1) Large numbers of buyers and sellers
2) Homogeneous product
3) Independent decision making
4) Freedom of entry and exit
5) Perfect mobility
6) No transport cost
DISADVANTAGE
There is main disadvantage is that in this, market buyers and sellers have no control over price. Firm should only obey the price fix by firm.
First and foremost advantage of perfect competition is that chances of consumer exploitation are very low in case of this type of market structure because in perfect competition sellers do not have any monopoly pricing power and hence they cannot influence the price of the product or charge higher than the normal price