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'''Perfect competition''' is an economic term referring to the condition that there is so much competition between vendors that a [[seller]] would lose customers if he raised prices at all. Such a competitive market is very good for the [[consumer]]. A perfectly competitive market must:
'''Perfect competition''' is an economic term referring to the condition when there is so much competition between vendors that a [[seller]] would lose customers if he raised prices at all. Firms that are in a perfectly competitive market are thus referred to as "Price takers". In essence, a perfectly competitive market structure has no market power. Such a market is good from the [[consumer]]'s perspective. A perfectly competitive market must:
*Have products which are perfect [[substitutes]] for each other.
*Have products which are perfect [[substitutes]] for each other.
*All the companies must have identical costs for their supplies.
*All the companies must have identical costs for their supplies.
*The consumers must be fully informed about the products.
*The consumers must be fully informed about the products.
*Free entry and exit (No barriers to entry) - it is relatively cheap for both new firms to enter the industry and for old firms to leave.
The [[market]] for [[dairy]] products is close to perfect competition.
The [[market]] for [[dairy]] products is close to perfect competition.