The implications of large numbers of producers, identical products, freedom of entry and exit, and perfect knowledge for firms and the industry
Perfect competition rests on four key assumptions. Each assumption removes a firm's ability to control its price or earn long-run profits above the bare minimum needed to stay in business.
Real World
Foreign exchange markets come close to perfect competition: millions of traders buy and sell identical currencies with near-perfect price information via Bloomberg terminals, leaving no single trader able to set the rate.
Exam Focus
Link each assumption to its consequence — e.g. free entry → supernormal profit competed away in the long run — to build a chain of reasoning for higher marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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