Perfect competition Flashcards
Describe the market and its consumers
The market is large, therefore there is a large or infinite number of consumers
How many suppliers are there
There is a large or infinite number of suppliers that supply the market
What does it mean by product homogeneity?
The output supplied by each firm in the market is identical
What is a price taker
Firms are price takers meaning that they every firm takes the market equilibrium price as the price it sells output for
The demand curve for Perfect competition is
horizontal because they are price takers
What do buyers and sellers know
Buyers and sellers have perfect knowledge about the market situation meaning that they are both aware of the prices in the market
What is there freedom of
There is freedom of entry to and exit from the industry. When firms earn abnormal profit in an industry, new firms will enter as there are no barriers to entry
