In theoretical models where conditions of perfect competition hold, it has been theoretically demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This implies that a factor’s price equals the factor’s marginal revenue product. This is also the reason why “a perfect competition in economics pdf does not have a supply curve”.
However, in long-run, productive efficiency occurs as new firms enter the industry. Competition reduces price and cost to the minimum of the long run average costs. The theory of perfect competition has its roots in late-19th century economic thought. Real markets are never perfect. Those economists who believe that in perfect competition as a useful approximation to real markets may classify those as ranging from close-to-perfect to very imperfect. Share and foreign exchange markets are commonly said to be the most similar to the perfect market. The real estate market is an example of a very imperfect market.
There is a set of market conditions which are assumed to prevail in the discussion of what perfect competition might be if it were theoretically possible to ever obtain such perfect market conditions. A large number of consumers with the willingness and ability to buy the product at a certain price, and a large number of producers with the willingness and ability to supply the product at a certain price. All consumers and producers know all prices of products and utilities each person would get from owning each product. These determine what may be sold, as well as what rights are conferred on the buyer. Costs or benefits of an activity do not affect third parties. This criteria also excludes any government intervention.