What is the perfect market?
The perfect market is a concept in economics, especially a neoclassical economy that refers to the market with what is called perfect competition, a set of conditions under which no market participant has the power to influence the price of any commodity it buys or sells. On such a market, supply and demand forces will cause balance in which supply and demand for each commodity are exactly equal to the current price. Real perfect competition can only exist under a set of conditions that are not possible in the real world, so there are no real perfect markets. The concept is used in economics, not to describe any condition in the real world, but as a construct to simplify experiments with the idea of how economies work and provide a scale to which the real world markets can be compared.
It is important to realize that the perfect market and perfect competition are not Moral courts. Whether the market is EFEKtive is a separate issue from justice or the suitability of processes or the outcome of this market. In this context, it means calling something perfect that it is an ideal concept used to simplify thought experiments or calculations. It is similar to concepts in physics, such as a perfectly rigid body, which means an object that is not entirely affected by the application of forces and is never subject to deformation under any circumstances or perfect black body, which refers to an object that completely absorbs all incoming electromagnetic radiation. No real material has these attributes, but can be used as mental constructions for thinking about the scientific field.
There are a number of necessary conditions for the perfect market. The number of buyers and sellers is extremely large or endless, which makes every market participant to have any effect on market prices. All goods sold on each market are also completely homogeneous from one Supplier to the other and companies can enter and get off the market freely. All the wayRobci achieve normal profits, which means that their income equals their occasional costs. In addition, all market participants have perfect information about economic factors relevant to their decisions and are assumed that they are rationally acting to maximize their own usefulness. Finally, all exchanges can be carried out without transaction costs and all production factors - work, capital and natural resources - are perfectly mobile and can be moved to new uses in response to market conditions without costs.
The perfect market creates a situation called Pareto efficiency or Optimity Pareto, named for economist Vilfred Paret. This means it is impossible to change the distribution of goods to improve one person without getting worse at the same time. This is because in the balance created by perfect competition all possible mutually beneficial replacement produced. No real market is such, of course, but many economists use this idea as a way to explain the ECOnomic concepts or because exploring how and why the real market differs from the perfect market can help explain its functioning.
Perfect market concepts and perfect competition are widely used in the modern neoclassical economy, the dominant school of modern economic thinking, but their roles and importance are questionable among economists. Many economists consider these terms to be a way to identify areas where market processes can be improved through government intervention or other changes. Others consider them to be a useful thought experiment that helps explain the economic principles, but to question its value as a guide to assess the effectiveness of market markets in the real world or improve them through government policy, because many real markets work well despite their deviations from the model of perfect competition. Some economists and schools of economic thinking reject the thper -perfect market model completely claiming that the assumptions of the model omit the factors that are very necessary to make them with themThey gave as imperfect information and how market processes work over time.