Perfect & Imperfect Competitions & Condition for Equilibrium

Perfect Competition is a type of competitive market where there are numerous sellers selling homogeneous products or services to numerous buyers. Perfect competition is never exists in real market as it is based on theoretical assumptions. In perfect competition, the entry and exit is easy, prices for a product is uniform across the market and no governmental interference. In perfect competition, prices are decided by demand and supply forces and no firm is allowed to affect the price of product. 

Imperfect Competition is an economic structure, which does not fulfill the conditions of the perfect competition. It is real and exists in market as it is based on practical assumptions. Under this type of competition, the firms can easily influence the price of a product in the market and reap surplus profits. There are so many industries like telecommunications, automobiles, soaps, cosmetics, detergents, cold drinks and technology, where imperfect competition exists. Imperfect competition is also considered as real world competition in form of :

• Monopoly: Single seller dominates the entire market. 

• Duopoly: Two sellers share the whole market. 

• Oligopoly: Few sellers are there who either act in collusion or competition. 

• Monopsony: Many sellers and a single buyer. 

• Oligopsony: Many sellers and few buyers. 

• Monopolistic Competition: Numerous sellers offering unique products. 

Conditions of Equilibrium of the Firm and Industry:

A firm is in equilibrium when it has no tendency to change its level of output. It needs neither expansion nor contraction. It wants to earn maximum profits in by equating its marginal cost with its marginal revenue, i.e. MC = MR.