PERFECT COMPETITION

VS.
IMPERFECT COMPETITION

Dela Peña, John

De Chavez, Rose Anne
Trinidad, Kristine
DEFINITION OF PERFECT COMPETITION

Perfect Competition is an economic structure where the

degree of competition between the firm is at its peak.
Given are the salient features of the perfect competition:

 Many buyers and sellers.

 Product offered is identical in all respects.

 Any firm can come and go, as per its own discretion.

 Both the parties to the transaction are having complete knowledge

about the product, quantity, price, market and market conditions as
well.
 Transportation and Advertising cost is nil.

 Free from government interference.

 The price for a product is uniform across the market. It

decided by the demand and supply forces; no firm can
affect the prices, that’s why the firms are price takers.

 Each firm earns a normal profit.

DEFINITION OF IMPERFECT
COMPETITION

The competition, which does not satisfy one or the other

condition, attached to the perfect competition is imperfect
competition.

Under this type of competition, the firms can easily

influence the price of a product in the market and reap
surplus profits.

Also considered as real world competition.

VARIOUS FORMS OF IMPERFECT
COMPETITION

 Monopoly: Single seller dominates the entire market.

 Duopoly: Two sellers share the whole market.

 Oligopoly: Few sellers are there who either act in

collusion or competition.
 Monopsony: Many sellers and a single buyer.

 Oligopsony: Many sellers and few buyers.

 Monopolistic Competition: Numerous sellers offering

unique products.
KEY TAKEAWAYS

 The competitive market, in which there are a large number of

buyers and sellers, and the sellers supply identical products to
the buyers; it is known as perfect competition. Imperfect
competition occurs when one or more conditions of the
perfect competition are not met.

 Perfect competition is a hypothetical situation, which does not

apply in the real world. Conversely, Imperfect Competition is
a situation that is found in the present day world.

 When it comes to perfect competition, there are many players

in the market, but in imperfect competition, there can be few
to many players, depending upon the type of market structure.
 In perfect competition, the sellers produce or supply
identical products. As against, in imperfect competition
the products offered by the sellers can either
be homogeneous or differentiated.

 If we talk about perfect competition, there are no barriers

to the entry and exit of the firms which is just opposite in
the case of imperfect competition.

 In perfect competition, it is assumed that the firms do not

influence the price of a product. Hence they are price
takers but in imperfect competition, the firms are price
makers.