Perfect competition

Model graph

Perfect , or pure , free , competition is an economic model, an idealized state of the market when individual buyers and sellers cannot influence the price, but shape it with their contribution of supply and demand . In other words, this is a type of market structure where the market behavior of sellers and buyers is to adapt to the equilibrium state of market conditions.

Signs of perfect competition:

• an infinite number of equal sellers and buyers;
• homogeneity and divisibility of products sold;
• lack of barriers to entry or exit the market;
• high mobility of factors of production ;
• equal and full access of all participants to information (prices of goods).

In the case when at least one sign is absent, competition is called imperfect. In the case when these signs are artificially removed in order to gain a monopoly position in the market, the situation is called unfair competition .

In some countries, one of the most widely used types of unfair competition is to give bribes , explicitly and implicitly, to various representatives of the state in exchange for various kinds of preferences .

David Ricardo revealed a trend towards a decrease in the economic profit of each of the sellers, which was logical in the conditions of perfect competition.

In a real economy, the stock market is more like a perfect competition market. In the course of observing the phenomena of economic crises, Keynesians came to the conclusion that such a form of competition usually fails, which can be overcome only through external intervention.