Homogeneous product
Also called: Identical product · Topic: Theory of the Firm, Supply and Perfect Competition · NCERT: Class 12, Ch 4 "The Theory of the Firm under Perfect Competition"
Meaning
A homogeneous product is one where the output of one firm cannot be told apart from the output of any other firm in the market. A buyer gets the same good whichever seller they buy from. This is a feature of perfect competition. Because every unit is the same, no firm can charge more than the others. There is no brand loyalty, and firms have no reason to spend on advertising.
Example
One company's shares on a stock exchange are homogeneous. Every share is identical, so a buyer does not care which seller it comes from. Fairly uniform wheat or paddy sold by many farmers in a mandi comes close to this.
Don't confuse with
- Differentiated product: brands with different packaging, quality or image (soaps, toothpaste). These belong to monopolistic competition, where firms have some control over price.
Related concepts
- Perfect competition
- Large number of buyers and sellers
- Free entry and exit
- Perfect information
- Price taker