Discuss and explain the characteristics of a perfectly competitive market
A perfect market is a market where there are many buyers and sellers (Chang, 2015). The products sold in that market are usually identical, and one can enter ii and out of that market very quickly since there are no barriers.
Characteristics
- In a perfectly competitive market, you will find so many firms that are selling identical products.
- All businesspeople in that market have knowledge accessibility (Chang, 2015). Even to those new potential businesses who want to enter the market, all information is usually perfect.
- Firms can enter the market and exit freely; there are no barriers put into restricting entry and exit.
- No firm can control the market or its conditions or influence the market. Therefore, the perceived price is usually as a result of the whole industry.
- In a perfectly competitive market, the contribution of all producers to the market is insignificant. Hence, an increase in the production of one producer cannot change the supply curve.
What is the demand schedule, curve? What is a supply schedule and curve?
In a perfectly competitive market, a demand curve can be defined as a line that slopes downwards a graph showing that as the price of goods increases, the quantity demanded by consumers decrease (Nyborg, 2019). A demand schedule is usually a table showing the quantity of goods demanded at different set prices in the market.
A supply schedule is a table like representation that shows the quantity of goods that can be supplied at given different prices (Nyborg, 2019). The supply curve is usually illustrated in a graph and is shows the relationship between price and quantity of goods supplied at a given time.
Figure 1
The figure below shows the demand and supply curves for soap in a particular market.
Figure 2
The table shows an example of demand and supply schedules.
References
Chang, J. (2015). EBay: Towards A Perfectly Competitive Market. International Business &
Economics Research Journal (IBER), 9(3). https://doi.org/10.19030/iber.v9i3.536
Nyborg, K. (2019). Humans in the Perfectly Competitive Market: Report from a Fictional Field
Study. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3369164