Q.(a) Explain the features of Perfect Competition.

(a) Perfect competition has many buyers and sellers, a homogeneous product, free entry/exit, perfect knowledge and mobility, and no transport cost, so firms are price-takers with a single ruling price. (b) Gandhian economics stresses village self-sufficiency, Swadeshi, decentralisation, khadi and cottage industries, dignity of labour, trusteeship and non-violence (Sarvodaya).

(a) Features of Perfect Competition

Perfect competition is a market structure in which competition is present in its purest form. Its main features are:

1. A very large number of buyers and sellers. Each is so small relative to the market that no single buyer or seller can influence the price; every firm is a price-taker.
2. Homogeneous (identical) product. All firms sell an identical product, so buyers have no reason to prefer one seller over another.
3. Free entry and exit. Firms can freely enter the industry when profits are high and leave when they incur losses; this ensures only normal profit in the long run.
4. Perfect knowledge. Buyers and sellers have full information about prices and market conditions, so a single price prevails.
5. Perfect mobility of factors of production. Factors can move freely from one use or place to another.
6. Absence of transport cost. It is assumed there is no transport cost, so the same price rules everywhere.
7. Single ruling price. As a result of the above, one uniform price prevails throughout the market, and for each firm AR = MR = Price.

(A pure/perfect market also assumes no government interference.)

(b) Gandhian Economic Ideas

Mahatma Gandhi's economic thought was rooted in ethics, non-violence and the welfare of the common villager. His main ideas were:

1. Village self-sufficiency (Gram Swaraj). The village should be a self-reliant, self-governing unit, meeting its own basic needs of food and clothing.
2. Swadeshi. Encouragement of home-made and locally produced goods and boycott of foreign goods, to make the nation self-reliant.
3. Revival of village and cottage industries. Special emphasis on khadi and handspun cloth (charkha) and small village industries to provide rural employment.
4. Decentralisation of production and power. Small-scale, dispersed production and decision-making at the village level rather than large centralised industry. …