Two students in a class were discussing perfectly competitive markets. One student said-"All the buyers and the sellers are completely informed about the price, quality and other relevant details about the product and the market." Which feature of perfect competition did she talk about?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Perfect information
The student spoke of buyers and sellers being completely informed about price and quality. That is the feature of perfect information.
Option (1) Large number of buyers and sellers — Incorrect. This feature means each buyer and seller is too small to influence the market.
Option (2) Free entry and exit — Incorrect. This means firms can easily enter or leave the market.
Option (3) Perfect information — Correct. Everyone knows the price, quality and other details of the product.
Option (4) Homogeneous product — Incorrect. This means every firm’s product is identical.
NCERT (2026-27): “4.1 Perfect Competition: Defining Features … The existence of a large number of buyers and sellers means that each individual buyer and seller is very small compared to the size of the market. This means that no individual buyer or seller can influence the market by their size. Homogenous products further mean that the product of each firm is identical. So a buyer can choose to buy from any firm in the market, and she gets the same product. Free entry and exit mean that it is easy for firms to enter the market, as well as to leave it. This condition is essential for the large numbers of firms to exist. If entry was difficult, or restricted, then the number of firms in the market could be small. Perfect information implies that all buyers and all sellers are completely informed about the price, quality and other relevant details about the product, as well as the market.” |