Competitive Markets  

Competitive markets are characterised by:

  • Many firms as opposed to a small number
  • Low barriers to entry and exit. – Contestable market
  • Low profits of incumbent firms
  • Relatively low prices.

In economics we have a formal model of perfect competition. But, in the real world perfect competition is a rarity because it assumes perfect information and homogenous products. However, most policy makers agree that competitive markets are a good thing for the consumer and society

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