top of page


Perfect competition has the following characteristics:

A perfectly competitive market has many firms producing the same (ie homogeneous) goods or services.

Under perfect competition producers and consumers have all the information they require – they have 'perfect knowledge' of the market.

There is complete freedom of entry into and exit from the market.

The price and level of output under perfect competition tends towards the equilibrium point. Producers attempting to sell at a higher price will not sell anything, and producers attempting to sell as a price below equilibrium would obtain 100% market share.

The demand 'curve' is horizontal – it is 'perfectly elastic'.


In the real world, it's difficult to identify industries that meet all of the 'perfect knowledge' and 'perfect information' criteria.
Some industries, on the other hand, are quite close.

Foreign exchange markets.Here currency is all homogeneous. Traders will also have access to a diverse variety of buyers and sellers. There will be a lot of useful information about pricing comparisons.
It is simple to compare prices while purchasing currencies.

Markets for agricultural products.
In some circumstances, multiple farmers sell identical items to the market, and there are numerous buyers.

It is simple to compare prices at the market.As a result, agricultural markets frequently approach perfect competition.
Is the Internet a real-world example of the perfectly competitive market of the textbooks?
Its claims to be so were quite convincing. For one thing, the vast majority of internet markets appeared to have relatively low entry barriers. Anyone could start an e-retailer of, say, books, compact discs, or downloads.

< Back
Untitled design(5).png

Economics notes  on

Perfect competition

Perfect for A level, GCSEs and O levels!

👑Subscribe to the Economics Study Pack and Download economics notes in PDF and EDITABLE versions!

Economics Study Pack
factors influencing demand.jpg
bottom of page