Perfect competition
The glossary of statistical terms, published by the Organisation for Economic Co-operation and Development (OECD), suggests perfect competition is defined by four conditions in a well-defined market:
- ‘There is such a large number of buyers and sellers that none can individually effect the market price. This means that the demand curve facing an individual firm is perfectly elastic.
- ‘In the long run, resources must be freely mobile, meaning that there are no barriers to entry and exit.
- ‘All market participants (buyers and sellers) must have full access to the knowledge relevant to their production and consumption decisions.
- ‘The product should be homogenous.
‘When these conditions are fulfilled in any well-defined market, the market is perfectly competitive; when they are fulfilled in all markets, the economy is perfectly competitive.’
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