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