Perfect information
Also called: Perfect knowledge · Topic: Theory of the Firm, Supply and Perfect Competition · NCERT: Class 12, Ch 4 "The Theory of the Firm under Perfect Competition"
Meaning
Perfect information means all buyers and sellers fully know the price, quality and other relevant details of the product and the market. It is one of the four features of perfect competition. Because everyone knows the market price, one seller cannot charge more than others for the same good. Buyers would simply go elsewhere. So the same good sells at one price across the market.
Example
On a stock exchange, share prices are public and update on screens for all traders. No one can sell the same share for much more than the price everyone can see. Platforms like e-NAM aim to give farmers similar price information across mandis.
Don't confuse with
- Asymmetric information: one side knows more than the other. For example, a used-car seller knows the car's defects but the buyer does not. This is a departure from perfect competition.
Related concepts
- Perfect competition
- Large number of buyers and sellers
- Homogeneous product
- Free entry and exit
- Price taker