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Definition

A theoretical economic market in which there are many willing buyers and many willing sellers and lots of substitute products. The closest that modern economies come to perfect competition is in agriculture, where there are thousands of farmers all producing maize, effectively competing with each other and at the same time there are many substitutes for maize which tend to limit any price increases. During a good season the farmer receives a bumper crop - but so do all other farmers which causes the price of maize to fall and margins to be squeezed. Perfect Competition is one of four possible states for a market to be in as defined by economists. The others being monopolistic competition, oligopoly and monopoly.

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