Answer to Question #103015 in Macroeconomics for gashu

Question

what does perfection competitive market mean and list its elements

Answer 1

Pure or perfect competition is a theoretical market structure in which the following criteria are met:

• All firms sell an identical product (the product is a "commodity" or "homogeneous").
• All firms are price takers (they cannot influence the market price of their product).
• Market share has no influence on prices.
• Buyers have complete or "perfect" information—in the past, present and future—about the product being sold and the prices charged by each firm.
• Resources for such a labor are perfectly mobile.
• Firms can enter or exit the market without cost.

Elements:

• A large number of buyers and sellers 
• Perfect information 
• Homogeneous products
• Well defined property rights
• No barriers to entry or exit
• Every participant is a price taker
• Perfect factor mobility
• Profit maximization of sellers
• Rational buyers
• No externalities
• Zero transaction costs
• Non-increasing returns to scale and no network effects
• Anti-competitive regulation