Economics Supply And Demand Questions
The characteristics of perfect competition include:
1. Large number of buyers and sellers: There are numerous buyers and sellers in the market, none of whom have the power to influence the market price.
2. Homogeneous products: The goods or services offered by all firms are identical or very similar, with no differentiation.
3. Perfect information: Buyers and sellers have complete knowledge about the market, including prices, quality, and availability of goods or services.
4. Free entry and exit: Firms can freely enter or exit the market without any barriers, ensuring that there are no restrictions on competition.
5. Price takers: Individual firms have no control over the market price and must accept the prevailing price determined by the forces of supply and demand.
6. Perfect mobility of resources: Factors of production, such as labor and capital, can easily move between different industries or firms.
7. Profit maximization: Firms aim to maximize their profits by producing at the level where marginal cost equals marginal revenue.
8. Absence of market power: No single buyer or seller has the ability to influence the market price or manipulate the market conditions.
9. Short-run and long-run equilibrium: In the long run, firms earn normal profits, and in the short run, they can earn supernormal profits or incur losses.
10. Lack of government intervention: The market operates without significant government regulations or interventions.