Competition market rules: [Essay Example], 421 words GradesFixer

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Competition market rules

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The most important feature of the perfect competition market is that buyers and sellers in the market do not have the power to influence price alone. Firms can not set prices independently under perfect competition conditions. The price for each company has already been set and the companies have to accept it. There are some features that make up the perfect competition market: There are a large number of sellers and buyers in the market who want to produce and buy the same goods. Because of the large number of producers and sellers in the market, the production and sales quantity of each of them is insignificant for the total sales quantity of the goods in the market. As a result, when a firm increases or decreases its sales volume, or even when it reduces to zero, there is no big change in the price of the goods. In other words, each firm has to accept the market price as it is. The same applies to buyers. Buyers are also very numerous. Accordingly, the decision to buy more or less of any of these items will not affect the price of the goods.

In the perfect competition market, buyers and sellers are completely free to enter and exit the market. Firms can go from one place to another, from one industry to another, when appropriate. Both buyers and sellers need full information about the market. Buyers and sellers know the market closely and thoroughly, knowing exactly which goods are sold at what price and where. As a consequence of all this, both buyers and sellers do not have the power to influence the market on their own in a competitive market.

In order for the perfect competition market to take place, the goods have to be an example of the same quality in every sense. Although there are a large number of organizations that produce a particular good or service in a market that is homogeneous, there is no objective or subjective difference between each unit (bread, washing powder, etc.). For example, different packaging, different labels prevent this condition from happening. Buyers may want to pay a higher price for better-served, better-packaged or different-labeled goods, assuming a quality difference. Thus, more than one price arises. For example, as in the case of laundry powder, if two brands that are completely identical in chemistry are different in the consumer’s eyes, we can not speak of homogeneity. That is why it is not even possible to advertise in the full competition market.

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