Pure Competition Definition

In economics, pure competition is a theoretical market structure in which a large number of small firms compete against each other to sell a homogeneous product. The key characteristics of pure competition are:

1. There are many sellers in the market who offer identical products.

2. There is free entry and exit into the market for firms.

3. Buyers have perfect information about the prices and quality of products offered by different sellers.

4. Firms cannot influence prices by changing their output or advertising expenditure.

5. Firms can only earn normal profits in the long run, as there is perfect competition among them.