... is a market model. It has various characteristics. The market contains a large number of buyers and sellers. Each buyer and sellers has a perfect knowledge about prices and product. The product being sold is homogeneous; this means that it is not possible to distinguish the product of one firm from that of other firms. There are no barriers to entry into or out of the industry; this means that there is a freedom of entry and exit. All firms are price takers; no single seller has control over the price. Industry Demand in Perfect Competition Firm Demand in Perfect Competition The industry demand in perfect competition is a common demand curve, the demand decreases as price increases (Diagram 1). There are many sellers within the market; therefore the effect of one of them would be insignificant. The firms in a perfect competition environment are said to be price takers. The ...

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