Pure competition is a
part and parcel of perfect competition. According to Chamberlin, "a market
becomes pure when monopoly is kept away."
Pure competition has
certain conditions of perfect competition. They are
1) Large number of sellers
2) Large number of buyers
3) Free entry and exist
4) Homogeneous product
5) Single Price
1) Large number of sellers/sellers are price
takers
There are many
potential sellers selling their commodity in the market. Their number is so
large that a single seller cannot influence the market price because each
seller sells a small fraction of total market supply. The price of the product
is determined on the basis of market demand and market supply of the commodity
which is accepted by the firms, thus seller is a price taker and not a price
maker.
2)
Large number of buyers:
There are many buyers
in the market. A single buyer cannot influence the price of the commodity
because individual demand is a small fraction of total market demand.
3)
Free entry and exit:
New firms can enter
and exit the market without any restrictions.
4)
Homogeneous product:
Firms produce and
sell identical units of a given product, in purely
competitive market,
i.e., units of a commodity produced by each of them is uniform, in respect of
size, shape, colour, quality, etc. Thus commodities have perfect substitute for
each other.
5)
Single price:
In Pure Competition
all units of a commodity have uniform or a single price. It is determined by
the forces of demand arid supply.
