Perfect Competition

Perfect competition is an industry which contains a lot of buyers and sellers and it has no barriers to entry which means it is an open market or industry for competitors to enter freely. For example, the people who are selling fruits, vegetables, or meat in the competitive market. This industry is free for anyone to come in as anyone who is interested to enter this industry is able to do so because there are no brands to their products as they are homogeneous. Like fruits has no brand. You can only differentiate it from their names or which supermarket can you get them from.

On the other hand, perfect competition is an industry which is a price taker. That means the industry has no right to adjust the price of the products as the price must be set according to the equilibrium market price. The demand of these products is perfectly elastic since each firm’s or market’s outputs are perfect substitute with one another. Then, the sellers have to know their profits and losses in terms of short-run and long-run. So if the sellers or firms are earning economic profit, they may enter new industry to maximize their profit whereas if they are earning economic loss, they may have to exit the industry.

So as you can see in your local supermarket and especially wet markets, competition is fair and healthy. You can also tell that the price is determined by an equilibrium market price by going to different markets in a particular area. You will find that the price do not vary as much.