Perfect competitive market:

1. Perfect market or perfect competitive market is defined by several characteristics.

Some are:

• Perfectly competitive market is such a market where firms accepts market price and sell their commodities
• Commodities are homogeneous (i.e. the qualities and characteristics of goods or services available in market do not vary between different suppliers)
• There are large number of buyers and sellers
• Buyers and sellers have complete knowledge of market situation
• Price is determined by demand and supply of a commodity. Firms sells commodity on this price only and no firm can influence this price. Hence, price is fixed and constant.

2. In perfect competition, market price (P) = Average Revenue (AR) = Marginal Revenue (MR) i.e. (P – AR = MR).
3. Under such market condition, if price of commodity is ₹ 50 then Average
Revenue and Marginal Revenue of firm will also be ₹ 50.
4. As a result, the curves of Average Revenue and Marginal Revenue of the firm are same and also parallel to X-axis. This curve is represented as DD in the diagram.