Perfect Competition

Definition

Perfect competition describes an idealized market structure where there are many buyers and sellers who have perfect information about prices and products. In this type of market, no single buyer or seller has the power to influence prices.

Related terms

Price Taker: In perfect competition, firms are price takers because they have no control over the market price and must accept it as given.

Homogeneous Products: Homogeneous products are identical goods or services that cannot be differentiated by consumers based on brand or quality.

Market Entry and Exit: Perfectly competitive markets allow for easy entry and exit of firms, meaning new businesses can enter if they see potential profits, while existing firms can exit if they face losses.