PERFECT MARKET: This is a competitive market where producers can influence the prices of their products.
FEATURES OF PERFECT MARKET
LARGE NUMBER OF BUYERS AND SELLERS:
There must be a large number of buyers and sellers in order that no one buyer or seller can influence the market prices of commodities either by increasing or decreasing. There is a perfect knowledge of market condition in the area of price and the types of goods and high demand.
HOMOGENEITY OF COMMODITIES
The goods that are sold must be identical to the eyes of the buyers. This helps to stabilize the prices of such goods.
ADEQUATE INFORMATION ABOUT THE MARKET
This is necessary in a perfect market in order that everyone in the market will have a perfect knowledge of the market conditions. The people in the market reach themselves with respect to the prices of some particular products as well as the demand and the conditions of supply.
FREE ENTRY AND EXIT
In this type of market, there is an absolute freedom of entry and exit. A new seller or firm is free to set up any form of business he likes at any point in time. Also, an old or existing seller or firm can fold up and quit the market without any restriction whatsoever.
ABSENCE OF PREFERENTIAL TREATMENT
No form of preferential treatment for any particular class of buyers and sellers exist.
PORTABILITY
Goods traded in a perfect market must be easily carried from one part of the market to another.
The diagram above illustrates the equilibrium position where perfect competitor makes normal profit and abnormal profit at both short-run position and long run position respectively.