Managerial Economics & Business Economics Concepts for MBA, BBA, B. Com, M. Com Students. by https://www.it-workss.com/

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Perfect competition
Market conduct and performance in atomistic industries provide standards against which to
measure behaviour in other types of industry. The atomistic category includes both perfect
competition (also known as pure competition) and monopolistic competition. In perfect
competition, a large number of small sellers supply a homogeneous product to a common
buying market. In this situation no individual seller can perceptibly influence the market price at
which he sells but must accept a market price that is impersonally determined by the
total supply of the product offered by all sellers and the total demand for the product of all
buyers. The large number of sellers precludes the possibility of a common agreement among
them, and each must therefore act independently. At any going market price, each seller tends
to adjust his output to match the quantity that will yield him the largest aggregate profit,
assuming that the market price will not change as a result. But the collective effect of such
adjustments by all sellers will cause the total supply in the market to change significantly, so
that the market price falls or rises. Theoretically, the process will go on until a market price is
reached at which the total output that sellers wish to produce is equal to the total output that
all buyers wish to purchase. This way of reaching a provisional equilibrium price is what the
Scottish economist and philosopher Adam Smith (1723–90) described when he wrote of prices
being determined by “the invisible hand” of the market.