Perfect Competition Notes & Questions (A-Level, IB)

Relevant Exam Boards: A-Level (Edexcel, OCR, AQA, Eduqas, WJEC), IB, IAL, CIE
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Perfect Competition Definition:
A market with Perfect Competition is defined as having an unlimited number of buyers and sellers, perfect information (eg. with regards to product pricing of all firms), no barriers to entry or exit, and all firms sell homogenous (the same) goods.

Perfect Competition Examples & Explanation:
If you are one of many Ebay stores selling the same unbranded masks online during the Coronavirus epidemic, you are likely to charge a very similar market price. This is because if you sell at a higher price, consumers will buy from other stores. Hence, you are a price taker in the market. As a result, you will sell each mask for the same price to the unlimited number of buyers out there, causing your average and marginal revenues to be the same. As consumers have visibility over most stores and their listing prices, they have near perfect information of the market. There are also little to no barriers to entry/exit in the market, as it is extremely easy to set up or close a store on Ebay to sell masks. Perfect competition is the only market structure that has allocative efficiency by default, when compared to monopolistic competition, oligopoly or monopoly, where competition is imperfect. However, this form of market structure is unlikely to exist in reality due to its extreme competition and assumptions. Therefore, it is more of an Economic model for theoretical than practical purposes. Another close example is the currency exchange market where the service provided by firms is highly similar.

Perfect Competition Economics Notes

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Perfect Competition Video Explanation – EconPlusDal

The left video explains the perfect competition market structure, the right illustrates perfect competition in the short-run.


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Perfect Competition Multiple Choice Questions (A-Level)

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Perfect Competition Essay Questions (IB)

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Perfect Competition Examples in Real Life


Related A-Level, IB Economics Resources

EconPlusDal YouTube Channel
Shutdown Condition

Short Run
Long Run

Business Economics: Perfect Competition

Market Structure: Perfect Competition

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