In: Economics
Explain, why Perfect Competition is regarded as the best market structure for the society?
Before getting answer of this question let us understand the meaning of perfect competition-
It is a market structure type where
There are large number of buyers and sellers in the market
The price is decided only by the market forces that is demand and supply
Long term economic profit is zero
It is assumed that both buyers and sellers are perfect knowledge about the market
There are no barriers to entry and exit in the market
Now this market is called the best market structure for society
The main reason behind is that in this market the price making power is neither in the hands of buyers nor in the hands of sellers
It is totally decided by the market forces and second reason is that due to the no barriers of entry and exit in this market
This causes new players to enter in this market at any point of time and exit as well
This creates a competitive environment which is best for the consumers as well as for the sellers