Question

What are some real-life examples of perfect competition and example of how it fits into the four assumptions of prefect competition. Please don't mention gasoline prices. Something that people would see everyday.

Answer 1

Answer : Real life examples of perfect competition are vegetable market and fruit market.

Four basic assumptions of perfect competition are : i) All sellers are price taker; ii) All sellers sell the homogeneous product; iii) There exists free entry and exit facility; iv) Many sellers exists in perfectly competitive market.

In case of vegetable market and fruit market all sellers are price taker. Any single seller cannot influence the market price level.

In vegetable market and fruit market many sellers exists.

In vegetable market and fruit market all sellers sell homogeneous product.

Vegetable market and fruit market has sellers' free entry and exit facility.

Thus, the vegetable market and fruit market satisfies the four assumptions of perfect competition.