What are the characteristics of perfect competition market how does it differ from imperfect competition market?

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Definition: Imperfect competition is a competitive market situation where there are many sellers, but they are selling heterogeneous (dissimilar) goods as opposed to the perfect competitive market scenario. As the name suggests, competitive markets that are imperfect in nature.

Description: Imperfect competition is the real world competition. Today some of the industries and sellers follow it to earn surplus profits. In this market scenario, the seller enjoys the luxury of influencing the price in order to earn more profits.

If a seller is selling a non identical good in the market, then he can raise the prices and earn profits. High profits attract other sellers to enter the market and sellers, who are incurring losses, can very easily exit the market.

There are four types of imperfect markets:
- Monopoly (only one seller) - Oligopoly (few sellers of goods) - Monopolistic competition (many sellers with highly differentiated product) - Monopsony (only one buyer of a product)

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