Characteristics of Perfect Competition
- The characteristics of perfect competition are as follows
- There are many buyers and sellers: due to the number of market participants sellers are price takers
- There are no barriers to entry and exit from the industry: firms can start-up or leave the industry with relative ease which increases the level of competition
- Buyers & sellers possess perfect knowledge of prices: this assumption presupposes perfect information e.g if one seller lowers their price then all buyers will know about it
- The products are homogenous: this means firms are unable to build brand loyalty as perfect substitutes exist and any price changes will result in losing customers