Perfect competition is a market structure where the perfect product is traded, by a perfectly level playing field with perfectly open information exchange among the players. Baumol and Blinder (2009, p. 198) defines perfect competition as having the following…
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Vegetables, for example is a homogeneous product while soap is not. Because the consumer will not care who supplies the product, there is tougher competition among suppliers.
There is freedom of entry and exit. Firms can easily enter the market without impediments brought about by old timers and should they decide that the market is no longer attractive, they can leave without problems. Suppliers of trout, for example, will experience this type of freedom.
Lastly, there is perfect information, i.e., no unknowns in the market. Price, supply and demand information is available to all players regardless of size and status. Stock trading of Gold for example, has the information readily available for all players to use in their trade.
It maybe hard to find a market under perfect competition, despite the examples mentioned above. However, it definition is made for the purpose of differentiating other market structures present in the real world (Baumol and Blinder, 2009, p. 199).
Economics as a subject tends to be viewed as neutral and objective, even emotionless when expressed in terms of humanity. However modern economists have taken the view that motives and emotions do play an intrinsic part in economy principles and decision.
Emotions affect businesses. In his paper, Gopal asserts that there is a fifth element in which business can retain customers and their profitability apart from the four P’s of marketing – a better product, a lower price, an attractive promotion, or a more convenient location (placement)—the fifth being people (2004). All businesses have human customers at the end of the chain, who are needed to realize profits. Gallup research found out that 70% of customers’ decisions are based on positive interactions with the sales staff (cited in Gopal, 2004), thus the evidence of an emotionally-driven economy.
Staveren shares the same view in his dissertation that
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