Market structure
PERFECT
COMPETITION
PRESENTED BY: AMAD, AKIATAN,
AMPLAYO, ALCANSADO
Market Structure
Market structure in
economics categorize
how firms interact within
a market based on the
degree and nature of
competition for the goods
and services they sell.
Perfect Competition
Perfect competition is a
theoretical market structure
with many buyers and sellers,
identical products, and no
barriers to entry or exit. In this
market, individual firms are
"price takers," .
Long Run Short Run
Key characteristics of perfect
competition
• Numerous buyers and
sellers: There are many
participants in the market,
and each one is too small
N
to influence the price on
s
their own.
m
Identical products: All firms sell
products that are homogeneous, or
identical, so consumers have no reason
to prefer one seller over another based
on the product itself.
No barriers to entry or exit: It is easy
for new firms to enter the market and
for existing firms to leave, which
prevents any single firm from gaining
significant market power.
Perfect information: Both buyers and sellers have
complete information about prices, product quality,
and market conditions.
Price takers: Firms cannot set their own prices;
they must accept the market price. If a firm tries to
charge a higher price, it will lose all its customers.
No advertising: Since products are identical, firms
have no need to advertise to differentiate
themselves.
Why perfect
competition is a
useful economic
model?
Real-world benchmark: While perfectly
competitive markets rarely exist in their pure form,
they serve as a benchmark for comparing real-
world markets.
Efficiency: This model is used to demonstrate how
competitive markets can lead to maximum
efficiency, with firms producing at their lowest
possible average cost in the long run.
Price determination: It provides a clear
example of how supply and demand
interact to determine market price and
quantity.
Thank you
FOR LISTENING!