PERFECT MARKET. What is perfect market? A perfect market may be defined as one in which buyers or sellers cannot influence the prices of goods and services. Perfect market is also called competitive market or perfect competition.
One major condition that will make a producer to enter a competitive market is only when profits are made while he will leave the competitive market if losses are made.
Benefits Consumers Derive from Perfect Competition
Consumers benefit from perfect competition in the following ways.
- Competition allows consumers to benefit from lower prices.
- Efficient allocation of resources enable producers to produce what consumers want.
- Competition promotes the production of quality products
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How profits can be maximized in a perfectly competitive firm
Profits is maximized for a perfectly competitive firm when:
- The marginal revenue is equal marginal cost.
- The marginal cost curve cuts the marginal revenue from below.
Conditions or features necessary perfect market
- Homogeneous goods: The goods bought and sold in a perfect market be homogeneous; that is, they must be identical. They must be of the: shape, weight, colour, etc. must be the same in the e consumer.
- Free entry and exit: There is 1 into the market for new firms i and free exit for the existing or
- Large buyers and sellers: large number of buyers and sell of whom has no control prevailing prices.
- No preferential treatment: market all buyers must be treated Also, sellers must not sell either above prevailing prices favouritism.
- Perfect knowledge: There perfect information or know the price of goods and services.
- Common price: In a perfect n commodity concerned bears I price tag throughout
- Portable goods: The goods must be easy to carry from < another; for where such geo portable, they will be sold at different prices.
- Easy transfer of factors of production: In perfect market, factors of production are transferred easily to where they are needed.
