Perfect competition
In economics, specifically general equilibrium theory, the perfect market, also call as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In theoretical models where conditions of perfect competition hold, it has been demonstrated that a market willan equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This equilibrium would be a Pareto optimum.
Perfect competition enables both allocative efficiency & productive efficiency:
The notion of perfect competition has its roots in late-19th century economic thought. Léon Walras provided the first rigorous definition of perfect competition and derived some of its leading results. In the 1950s, the view was further formalized by Kenneth Arrow and Gérard Debreu.
Imperfect competition was a theory created to explain the more realistic quality of market interaction that lies in between perfect competition and a monopoly. A crucial figure in this theory is a man named Edward Chamberlain wrote a book titled "Monopolistic Competition" in 1933 as "a challenge to the traditional viewpoint that competition and monopolies are alternatives and that individual prices are to be explained in either terms of one or the other" Dewey,88. In this book, and for much of his career, he "analyzed firms that clear not pull in identical goods, but goods that aresubstitutes for one another" Sandmo,300. Another key player in understanding imperfect competition is Joan Robinson, who published her book "The Economics of Perfect Competition" the same year Chamberlain published his. While Chamberlain focused much of his name on product development, Robinson focused heavily on price positioning and discrimination Sandmo,303. The act of price discrimination under imperfect competition implies that the seller would sell their goods at different prices depending on the characteristic of the buyer to include revenue Robinson,204. Joan Robinson and Edward Chamberlain came to many of the same conclusions regarding imperfect competition while still adding a section of their twist to the theory. Despite their similarities or disagreements about who discovered the idea, both were extremely helpful in allowing firms to understand better how to center their goods around the wants of the consumer tothe highest amount of revenue possible.
Real markets are never perfect. Those economists who believe in perfect competition as a useful approximation to real markets may categorize those as ranging from close-to-perfect to very imperfect. The real estate market is an example of a very imperfect market. In such(a) markets, the theory of thebest proves that if one optimality precondition in an economic advantage example cannot be satisfied, this is the possible that the next-best total involves changing other variables away from the values that would otherwise be optimal.