Agricultural marketplaces and the New York Stock Exchange are examples of pure competition. In pure competition, prices are determined by market demand and not by suppliers.
In an ideal economic system, there are a large number of independent sellers and consumers, and the product in question is readily available. Sellers are unable to reduce the price of a product because it is so widely available from competitors, while buyers are unwilling to do so because to the product’s high demand.
The vast majority of agricultural markets are exemplary of pure competition. Milk, for instance, is a product that is readily available in nearly every region of the world, is commonly consumed, and sells at consistent rates. If, however, a large proportion of producers were damaged by drought or cattle disease, unaffected producers would have a greater degree of market power since demand would stay strong but supply would decline.
The Common Stock Market is another example; common stocks are widely available and represent the lowest level of ownership. A further example is the Foreign Exchange Market, where participants purchase and sell foreign currencies. It is an electronic network that comprises individuals from all around the world, keeping competition and demand strong.
There are few instances of perfect competition. There may be brief periods of pure competition in numerous markets. Typically, however, a market will shift as the number of vendors and purchasers fluctuates, causing production, demand, and prices to change.
