Saturday, May 16, 2015

Can we attain Perfect Competition in the economy?

Can we attain Perfect Competition in the economy?
In indian market we are having all these characteristics but still we are not named as a Perfect Competition market. why? We are having large no of buyers and sellers but still we are not a Perfect Competition. We are also having homogeneous products but still all the services and products different to each other in terms of taste and preference. Taste and preference create a difference in the identical product. Any one can enter into the market any time and exit but seller and buyers are increasing day by day and as profit is also increasing infact indian market is attracting foreign players. I thing country's local factor's play a vital role in the market while determining prices of the product, demand of the product and etc. These day e commerce creating a problem for the seller's in the market and there is a heavy demand for the e commerce products in the market. Few people are coming with a new concepts of the business like paytm and freerecharge. so i feel for perfect competition  is depended on the local factors also and we need to redefine the definition of the Perfect Competition......
Perfect Competition is a situation where customer find everything on almost on equal price. but the question is can we attain that situation in the future?
Perfect Competition refers to a market where large numbers of buyers and sellers, well aware of the market conditions,economy, compete among themselves freely so that the prices of same goods tend to be equal.
Perfect Competition is also called Perfect Competitive market or simply the perfect market. In this market no individual buyer or seller can influence the market price in any way.
A Perfect Competitive market has the following basic characteristics or features.
(1) Large Number of Buyers and Sellers:
The buyers and sellers in a perfect market are innumerable. They cannot be counted. They can be compared to drops of water in the ocean or grains of sands in the desert of Sahara.Since there are large number of buyers and sellers, no single buyer or seller by his action can influence the total supply or price of the commodity.The price of the commodity is determined by the combined actions of all the buyers and sellers in the market. Once the price is determined by the market, each seller and each buyer has to accept it. 

(2) Homogeneous Product:

The product sold by all the seller is homogeneous or identical in every respect, i.e., quality, design, packing etc. The buyers therefore, do not prefer the product of one seller to that of another.As a result, all the sellers have to sell their product at an uniform price. If any of the seller tries to sell his product at a higher price, his product will be out of the market.

(3) Perfect Knowledge of Market:

Buyers and sellers have perfect knowledge about the market conditions. They are in very intimate contact throughout the market and whenever there is any change in the market that is immediately made known to all the buyers and sellers.

(4) Freedom of Entry and Exit:

There is no restriction upon the entry of a new firm in the market or upon the exit of an existing firm. Due to these characteristics, all firms can get only normal profit in the long-run. In the short-run, the number of sellers in the market is fixed.

(5) Uniform or Single Price:

Under perfect competition the price of product is determined by the market. An individual seller takes the price as given. He cannot influence the price. His contribution to the total supply of product is negligible. So an individual seller is price-taker. He is not price maker. He can sell more or less at the given price.

(6) Perfect Mobility of Factors:

Factors of production are perfectly mobile under the perfect competition. In other words, factors of production can freely move from one industry to another.

(7) Absence of Selling and Transportation Cost:

Perfect competition assumes that all producers and purchasers of a commodity are sufficiently close to each other and as a result, there are no selling and distribution cost.