Perfect Competition

Perfect competition is also called perfect competitive market or simply the perfect market. It refers to a market structure where innumerable buyers and sellers compete among themselves for an identical product so that a single price prevails in the market.

According to Cournot, “A perfect market is one in which the buyers have no preferences as between different units of the commodity offered for sale, sellers are quite indifferent to whom they sell and both buyers and sellers have full knowledge of prices in other parts of the market.”

The definitions given above show that in a perfect market no individual buyer or seller can influence the market price in any way. Their contribution to the total commodities purchased and sold is just like a drop in the ocean. They cannot influence the market price either by selling or purchasing more. Here an individual seller is a price taker and not a price maker. Perfect competition is an ideal market but difficult to find in the real world. However markets for some agricultural products like rice, potato, wheat etc. are said to nearer to perfect competition.