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Market — Economics STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsMarket3 Marks
Question
What is perfect competitive market ? State its conditions.
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Answer

  • When the prices of homogeneous products are uniform except transfer cost or transport cost, it is called the perfect competitive market.
  • In this type of market, demand of commodity of the firm is perfectly elastic and there is not influence of an individual firm on the price.
  • By accepting the price decided by the industry, firm has to take decision regarding production quantity.
  • In this type of market there are unlimited buyers and sellers and free entry exit of the firm and in long run firm gets equilibrium at normal profit. Following six conditions has to be followed for the existence of perfect competitive market.
    • There must be unlimited buyers and unlimited sellers in the market.
    • Goods sold by producer must be homogeneous.
    • Free entry and exit of the firm in the industry.
    • Producers, sellers and buyers has complete knowledge of the market.
    • Means of production must be completely mobile.
    • There should be absence of transportation cost (zero cost).

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