Market
A market is a place where goods and services are sold. It is an arrangement that facilitates contact between buyer and seller.
Forms of Market
- Perfect competition
- Monopoly
- Monopolistic
- Oligopoly
Perfect competition
It is a type of market where a large number of buyers and sellers are present. In such a market, products sold by all the sellers are homogenous and perfect substitutes of one another. Price is set by the industry not by a single firm, so, a single price prevails in the market.
Features of Perfect competition
- Large number of Sellers: There are a number of sellers selling a single product. For example, if you go to a vegetable market there are a large number of sellers who are selling vegetables of similar quality at the same prices.
- Large number of buyers: Just like there are a lot of sellers in the market, the number of buyers is also large, so that no one buyer can influence the price of the product.
- Homogenous product: The products being sold are similar in nature and are perfect substitutes for each other. For example, books market all the sellers sell the same type of books by the same author.
- Perfect Knowledge: Buyers have complete knowledge or information about the products being sold and at what prices because the same products are sold by a number of firms at uniform rate.
- Free entry and exit: Any firm can enter or exit freely from the market. Firm is free from any restriction on entry and exit. If the seller is expecting profits, they may enter and at the time of losses, the firm may exit the market.
- No transportation cost: In perfect competition there is a single price which prevails in the market so there are no extra transportation costs.
- Firm is a Price taker Not a price maker: There are a number of sellers under perfect competition selling the same commodity. So, no individual firm can change its price. Even if a firm tries to sell a product at a higher rate, the consumer will simply shift to the other firms because the same product is available at a lower price. If a firm wants to raise its price, it will lose its customers and will have to revise the price back to uniform.