Shakeera

Aziz
Grade 12
Economics
Project
Term 2
1
Table of Contents

Introduction……………………..……………………..……………………..……………………..…………………..…..…………3
Examples of perfect markets in South Africa……………………..……………………..………………..……………..3
Characteristics of perfect markets……………………..……………………..……………………..……………………..…5
Analysis of alignment to perfect market conditions………………………..……………………..……………….….6

Conclusion…………………………..……………………..……………….…………………………………………………………….7
Bibliography…………………………..……………………..……………….….………………………..……………………..….….8

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Introduction
A perfect market , may also be referred to as perfect competition, is a market structure where
there a large number of buyers and sellers of a homogeneous product at a price determined by
the market. Entry and exit into this market is fairly easy as there is no barriers in the long run.
All information is readily available to both buyers and sellers.

Examples of perfect markets in South Africa

Within the exchange market the Johannesburg Stock Exchange (JSE) portrays characteristics of
perfect competition.

Businesses (such as Cell C, Vodacom, Telkom and MTN) within the South African
telecommunications market exhibit characteristics of a perfect market.

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Within the transportation industry, the informal taxi services display characteristics of a perfect
market .

Supermarkets such as Shoprite , Pick n Pay , Spar and Checkers satisfy certain characteristics of
perfect competition.

The agricultural market for maize, fruits and vegetables can be considered a perfect market and
it complies with certain characteristics.

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Characteristics of perfect markets
1.Homogenous Products

• Products sold in a perfect market are identical with no difference in quality.

• Since the products are the same , it does not matter from which seller the buyer buys
the product from .There is no reason for a buyer to have preference of a product from a
particular seller .
• Only totally homogeneous products compete can compete on price .
• However , if the product slightly differs buyers can sell their products at a higher price by
grading them . An example would be the maize market which sells products that are
graded ( such as the sifted crushed maize and mixed maize meal ).

2.Large number of buyers and sellers

• Since there are a large number of buyers or seller, it is impossible for either to influence
the price . Example there are a large number of maize farmers.
• Since there are many sellers , the share that each seller contributes to the market is so
small that it does not influence the market supply, hence they cannot influence the
price.
• Each seller is considered a price taker and accepts the market price. This can be seen in
supermarkets where the prices of goods are more or less the same in Shoprite, Checkers
and Spar.
• If a seller decides to sell a product above the market price, the buyer will become aware
of this and look for another seller where they can get a better deal . For example if
Shoprite increases the price of a particular good , the buyer will become aware of this
and will look for a better deal at either Spar or Pick n Pay.

3.There is a high output and large choice

• Due to there being a large number of sellers , buyers have freedom to buy products from
whomever they wish .
• There will not be any shortages because if one seller runs out of a product , there are
many other sellers selling the same product at the very same price. For example if at the

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 bus rank , if one taxi is full , there are other taxis that will be able to take you to your
destination at the same price.

4.Freedom of entry and exit

• There is complete freedom of entry and exit in the market.

• No laws , permits , tenders or regulations prevent a new entrepreneur from joining the
market.
• There are no high start-up costs.
• It should also be easy for a business to leave the market and invest elsewhere.
• There is no such example within South Africa.

5. Perfect Information

• All buyers and sellers must have complete and accurate information regarding the
current market conditions.
• Both the buyer and seller knows what quality of the good is available, what the market
prices are and how to produce the product.
• New sellers are aware of how to produce the product.
• Buyers are aware of the characteristic of the product, how much they should be paying
and where they can buy it from.
• An example would be the JSE that makes all information available to the public (both
buyers and sellers).

Analysis of alignment to perfect market conditions

Johannesburg Stock Exchange ( JSE) Market

• The JSE satisfies the characteristic of there being many buyers and sellers . There are
approximately 400 companies listed on the board . There are also a large number of
buyers .
• The JSE offers a homogeneous product. Only one product is for sale on the JSE. All sellers
sell the same product, which is shares. However , price of the share may vary from
company to company. It is important to note that the companies do not influence the
market price by changing the quantity of shares available for sale.
• The JSE has complete information. Information about companies listed , shares available
for sale and prices are made available to everyone , both buyers and seller.
• There are almost no barriers to become a buyer . However, there are certain barriers to
entry to become a seller , for example the company has to be bigger than a certain level.

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 • There is also a large number of shares from different companies available to be
purchased, this means that buyers have a wide variety to choose from.

Agricultural market ( maize market )

• The product sold , which is maize ,is largely homogeneous. There is also grading of the
product . Due to slight differences in the crop farmed, there are different grades. Such
as: fine maize bran, fine crushed maize, sifted maize meal, sifted crushed maize, coarse
maize bran, mixed maize meal and maize rice.
• There are a large number of sellers , there are many farmers that grow maize. There are
also a large number of buyers of the product.
• The maize market deviates from a perfect market with regards to entry barriers . The
farmer had high start-up costs. Land, equipment and overhead costs are high. There are
no barrier entries for buyers.

Taxi industry

• There are a large numbers of buyers and sellers of the product. There are many people
who make use of taxi services and there a many people who offer taxi services, there are
many taxis.
• It deviates from perfect market with regards to barriers to entry. There are low barriers
such as fund needed to purchase a taxi. A permit is also required to be able to be part of
the industry.
• There are many taxis which means that buyers have a choice from which to choose with
no special preference .

Conclusion
There are many markets and businesses that satisfy certain characteristics of perfect market.
Such markets resemble perfect markets. Examples of businesses/markets that resemble perfect
markets in South Africa is the JSE, the telecommunications network, the taxi industry and the
maize market . However, perfect markets do no exist in real life, it is hypothetical. It is not
possible for a business to satisfy all characteristics of a perfect market, it deviates from certain
characteristics. No business fits all the characteristics due to real-world complexities such as
regulations , market power of large firms, barriers to entry and imperfect information. Barriers
to entry is one the main reasons why perfect markets do not exist, most businesses require high
start up costs. Although it is claimed that information is complete, there is still certain things
that certain buyers and sellers may be unaware of. Additionally, South Africa, like many other

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countries, have various market structures across different industries, ranging from monopolistic
competition to oligopoly.

Bibliography
• Is the JSE A Perfect Market ? (no date) prezi.com. Available at:
https://prezi.com/ayccjjyu59lc/is-the-jse-a-perfect-market/ ( Accessed: 21 April 2024).

• Perfect competition (2024) Wikipedia. Available at:

https://en.wikipedia.org/wiki/Perfect_competition (Accessed: 21 April 2024).
• Hayes, A. (no date) Perfect competition: Examples and how it works, Investopedia.
Available at: https://www.investopedia.com/terms/p/perfectcompetition.asp
(Accessed: 21 April 2024).
• Perfect competition and why it matters (article) (no date) Khan Academy. Available at:
https://www.khanacademy.org/economics-finance-domain/microeconomics/perfect-
competition-topic/perfect-competition/a/perfect-competition-and-why-it-matters-cnx
(Accessed: 21 April 2024).
• Perfect competition (2023) Corporate Finance Institute. Available at:
https://corporatefinanceinstitute.com/resources/economics/perfect-competition/
(Accessed: 21 April 2024).