Microeconomics For Dummies
Book image
Explore Book Buy On Amazon

Perfect competition is the name economists give to a market with many interchangeable firms, none of which can independently influence the market outcome. This scenario isn't all that likely in the real world, because it depends on a set of conditions that are unlikely to hold. But some markets do get quite close to approximating perfect competition; of course, many others do not come close.

When they do get close, they bring a number of benefits, which are most likely to go to consumers.

The word perfect means something very specific to economists. Perfect in the sense of perfect competition means that it fully satisfies a set of conditions that economists have placed on the model.

By way of an analogy, economists mean perfect competition in the same way as mathematicians describe a perfect circle as exactly satisfying a set of mathematical conditions regarding curvature.

The term certainly doesn't mean that in a perfectly competitive market everyone's always happier. In fact, for producers, a perfectly competitive market may be a difficult one in which to operate, because the forces of competition constrain their behavior.

About This Article

This article is from the book:

About the book authors:

Lynne Pepall, PhD, is a professor of economics at Tufts University. She has taught microeconomics at both graduate and undergraduate levels since 1987.

Peter Antonioni is a senior teaching fellow at the Department of Management Science and Innovation, University College, London, and coauthor of Economics For Dummies, 2nd UK Edition.

Manzur Rashid, PhD, is a lecturer at New College of the Humanities, where he covers second-year micro- and macroeconomics.

This article can be found in the category: