ECON-UA 2 Chapter Notes - Chapter 9: Demand Curve, Market Power, Perfect Competition
12 Apr 2016
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There are large numbers of buyers and sellers, and each buys or sells only a tiny fraction of the total quantity in the market. Sellers can easily enter into or exit from the market. In a perfectly competitive market, the number of buyers and sellers is so large that no individual decision maker can significantly affect the price of the product by changing the quantity it buys or sells. Buyers do not perceive differences between the products of one seller and another. Easy entry into or exit from the market. A perfectly competitive market has no significant barriers or special costs to discourage new entrants: any firm wishing to enter can do business on the same terms as firms that are already there. Perfect competition also requires easy exit: a firm suffering a long-run loss must be able to sell off its plant and equipment and leave the industry without obstacles.
