In This Chapter
Introducing perfect competition
Understanding the requirements for a perfectly competitive market
Explaining why perfect competition is a benchmark
Is perfection attainable? Although from time to time you may use the term casually (“I’ve made the perfect cappuccino,” “Reality TV shows are a perfect nuisance,” and of course, “This is the perfect book on microeconomics!”), most people understand that achieving perfection in the real world is impossible. But that doesn’t mean that they can’t imagine the perfect situation.
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.
In this chapter, we look at the equilibrium of output and price in perfect competition — an ideal ...