Perfect Competition is a market situation where competition is at its greatest possible level. The Perfect Competition market will reach an equilibrium in which the quantity supplied for every product or service, including labour, equals the quantity demanded at the current price.
Reference Definition by OECD: Perfect Competition is defined by four conditions (in a well-defined market): a) There is such a large number of buyers and sellers that none can individually affect the market price. This means that the demand curve facing an individual firm is perfectly elastic. b) In the long run, resources must be freely mobile, meaning that there are no barriers to entry and exit. c) All market participants (buyers and sellers) must have full access to the knowledge relevant to their production and consumption decisions. d) The product should be homogenous. When these conditions are fulfilled in any well-defined market, the market is perfectly competitive; when they are fulfilled in all markets, the economy is perfectly competitive.
Related Definitions in the Project: The Business Organisation; Project Proposal; Procurement
