What is Perfect Competition? Explain price determination under Perfect Competition? (Answer in detial)
Answers
Answer:
Explanation:
A Perfect Competition refers to a market situation which has a large number of buyers and sellers who are involved in the transaction of buying and selling identical products at the same price existing in the market.
The buyers and sellers in a perfect competition are vigilant about the existing market price of a good. As a result they cannot buy or sell their product at a higher price. This ensures that the product command the same price under the perfect market competition. The sellers and buyers cannot control the market price by decreasing or increasing their output or purchase respectively.
The price of the product under this competition is determined by the industry. This implies that the price of a product under perfect competition is influenced by two market forces such as market supply and market demand.
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