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Many people are not aware of what pure competition is. Pure competition or perfect competition as it is referred to at times is a market situation in which a certain good or service has so many consumers wanting to use it and there are so many manufacturers producing that particular good that no one business is able to determine what the price of that particular product is going to be. Hence the price continues to fluctuate and every producer charges consumers a different price.
In this type of a market situation, the sellers are commonly known as price takers. This means that the sellers do not have the power to set a price for a product which is outside a certain limit or range. It must be kept in mind that this rule must be exercised as there are many sellers in the market selling the same product. Consumers too cannot influence the price which producers will charge for a product as the group of people demanding a certain product are diverse and the producers need to cater to a large market; not to just one particular group of consumers.
If seen more closely, it would come to light that pure competition is more of a theory rather than being a market situation which actually exists. There are only rare instances in a market which operate with the existence of pure competition in the market. Even in pure competition does exist in a market, it tends to last only for a short period of time and due to different factors, the situation tends to shift and come back to normality. In order for pure competition to actually take place, certain factors require being present. It is the existence of these factors which shift the market situation back into its original and preferable position.
There are certain characteristics associated with pure competition. There must be a balance between sellers and buyers. When the number of buyers for a certain product is extremely large…
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