Pure competition in the market
Economics
Pure competition in the market is an economic term that is used to refer to a theoretical market structure where all firms sell the same product, all firms cannot influence the price in the market, many buyers, and there is perfect mobility of labor. In such a market, sellers do not possess any ability to determine the price that is charged on goods and services in the market (MacHovec, 2014). This is mainly because there is perfect information in the market. If any seller was to increase the price of a commodity, consumers would know and this would lead to zero sales.
Pure competition in the short-term suggests that there is perfect information among all the players in the market. Information is not only available for the buyers but also for the sellers. Examples include perfect information about sourcing and supplier pricing (MacHovec, 2014). When this happens, sellers are able to deliver into the market products and services at a very competitive price as their peers. On the other hand, buyers also possess such perfect information and are willing to share information about changes in the market. Doing this helps avoid a scenario where a seller can charge exorbitant prices for their goods.
In the long-run firms can enter or exit the purely competitive market as they wish. Such an attribute is observed since resources in the market are very easy to be reallocated depending on the demand that is present in the market. With this in mind, if profits are being made by firms within the market, more firms will enter. However, if losses are being made, firms are bound to exit the market it preference for other markets within the economy or industry.
Reference
MacHovec, F. J. (2014). Perfect competition and the transformation of economics. London:
Routledge.