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1. Perfect Competition

Perfect Competition is a market structure where there are many small firms selling identical products, with no barriers to entry or exit, and all firms are price takers.

Characteristics:

  • Large number of buyers and sellers.
  • Homogeneous products.
  • No control over price (price takers).
  • Free entry and exit in the market.

In this type of market, firms earn normal profits in the long run.

Real-Life Example:​

Agricultural markets, where many farmers sell identical products like wheat, are often cited as examples of perfect competition. No individual farmer can influence the price of wheat.