Question

Most economists will freely admit that finding a textbook example of perfect competition in the real world is unlikely. Can you think of any markets that come close in the sense that the firms involved exhibit price taking behavior?

Answer 1

In a perfect competition every participant is a price taker because there the market structure includes a large enough number of buyers and sellers. So so they do not have any impact on the the equilibrium price of the market and also because the firms are price takers they have a horizontal demand curve for their product. In perfect competition the forms are the price taker and hence the cannot increase the price of their product or else they would lose buyers or can potentially go out of business.

Every Real world market combines the element of both perfect competition and monopolistic competition. Most of the economics do admit that finding a Textbook example of perfect competition in the real world is not likely. A perfect competition is a theoretical construct and finding a real life example is difficult.

Close example of perfect competition can be agriculture. Characterized by a large number of small sellers and buyers and typically selling same product and having similar prices describes certainly that agriculture could be the perfect competition example. Hence agriculture could be an example of of perfect competition to a certain degree which can be described as the price taker.