Three Characteristics Of A Perfect Competitive Firm

There are several characteristics that make up a perfect competitive firm. As described in our textbook, ECON Microoeconomics by a McEachern, perfectly competitive firm is characterized by:
1. Having many buyers and sellers
2. Providing standardized products
3. Buyers and sellers are aware of the price of the good or service
4. Firm and resources are fully mobile
Other very important characteristics not listed in our textbook but listed in Economicsonline.co.uk as well as in our notes, are:
5. Low barriers of entry
6. Being price takers
There are many types of perfectly competitive firms throughout the Rio Grande Valley, for example, gasoline stations, convenience stores, restaurants, snow cone stands, as well as nail spas. A nail spa has

For example, it is extremely important for many firms to be involved in order to prevent and individual firm from profiting only. By having many firms we assure that only a small fraction of the total amount in the market is either sold or bought. Not only is having many buyers and sellers important, providing a standardized product, a commodity, is essential for this market type. A commodity will guarantee that the good or service being sold is roughly the same across all suppliers. Being highly mobile is another characteristic that a perfectly competitive firm must have. The firm needs to be able to relocate if suitable profits are not met. Full disclosure of price and availability is also crucial in a perfectly competitive firm. Buyers and sellers need to be aware of costs of products and services in order to secure that the deal they are obtaining is the best possible. In this type of market the barrier of entry is very low. Basically in order to enter and become a perfectly competitive firm the investor usually only requires sufficient financial capital and a license or permit. Perfectly competitive firms are price-takers. They are care price-taker characterized by accepting the price the market sets on their product or service, and have no control over the change of

All firms in this market work with the same price, which is why a change in price by a firm can cause a drastic change in their profits. Elasticity is the measure of how consumer demand will respond to a price change. Therefore, a perfectly competitive market is highly elastic, because any change in the price will affect the consumer demand for the good or service. Firms will avoid differing their price to other suppliers, because by doing so, costumers can easily take their business to any other firm, selling the same good or service. This type of situation creates a horizontal demand curve in a perfectly competitive market; the price will stay constant therefore the demand will also maintain consistency. A nail spa is an establishment that offers nail care services such as manicures, pedicures or any other nail enhancements. This type of establishment is widely available throughout the country and is the ideal business to open in the Rio Grande Valley. Of course a nail spa falls under the perfectly competitive market due to the factors that categorize