Perfect competition is a market structure with many buyers and sellers of homogeneous products, where each buyer and seller is a price taker. Key features include a large number of buyers and sellers, homogeneous goods, consumer awareness of prices, free entry and exit of firms, and firms as price takers. Under perfect competition, the demand curve is perfectly elastic and firms maximize profits where marginal cost equals marginal revenue.

1. Perfect Competition
Presented By- Muhamad Raza

2. Market:
• A Market is a place where buyers and sellers
interact with each other for the purpose of
buying and selling the goods/services at given
price.

3. Perfect Competition:
• It is a situation in which there are large number
of buyers and sellers which buy and sell
“Homogenous” goods.
• Perfect Competition is also referred to as Pure
Competition.

4. Features of Perfect Competition:
a) Very large number of buyer.
b) Large Number of Sellers.
c) Units of commodity sold is Homogeneous.
d) Consumer is aware of market situation.
e) Free entry and exit of firms.
f) A Firm is a Price taker.

5. Features of Perfect Competition:
a) Large Number of Buyers:
There are large number of buyers and one individual
can not influence the market supply.
b. Large Number of Sellers:
There are large number of sellers and one individual
can not influence the market demand.

6. Features of Perfect Competition:
c. Homogeneous Good:
Same quality goods, but different brand name.
d. Awareness of Market:
Consumer have perfect knowledge of market regarding
prices of goods and services.

7. Features of Perfect Competition:
e. Free entry or Exit of Firms:
There are no barriers for other firms to enter or exit in
the market.
f. Firm is Price Taker:
Because Prices are determined by the industry.

8. Demand Curve Under Perfect Competition
In perfect competition the demand curve is perfectly
elastic.
Reason for the perfectly elastic curve is because the
product is homogenous the price remains same and
when the price remains same the curve will be
perfectly elastic.

9. Graph of Demand Curve Under Perfect
Competition:
y
0
D
X
EP=∞
Q
P
Out
put
Pric
e
TR AR M
R
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
6 10 60 10 10
7 10 70 10 10
8 10 80 10 10

10. Normal Profit Under Perfect Competition:
Normal profit is an economic
condition occurring when the
difference between the firm's
total revenue and total cost is
equal to zero

11. Profit Maximization:
Two conditions are there for the profit maximization
• MC=MR
• MC cuts MR from below (MC should be rising)

12. Graph of Profit Maximization Under Perfect
Competition:

13. Thank You