

An apt comparison would be to the grains of sand on a beach.īecause all of the participating firms are so small, they are not able to alter Characteristics of Perfect Competition 1.

Theories surrounding comparison of perfect and imperfect competition come out of post-classical economic thought in the well-known, influential Cambridge tradition. Imperfect CompetitionĬompare perfect competition with imperfect competition, which is a market (real or hypothetical) that does not show all of the features of perfect competition as described in the next section. This is because profits at any level higher than that would draw new firms into the market and automatically bring profits back down to a normal level.

Profits are limited for firms-they are only able to make enough to keep their business going, rather than any additional profits. Where there is perfect competition, prices are a direct representation of the forces of supply and demand. There are no government controls on the market.Transportation for goods is affordable and efficient.All firms in the market are price takers, meaning they do not have the power to affect the price of the goods they sell.

