Why is agriculture an example of pure competition?

Question

Why is agriculture an example of pure competition?

Answer 1

If you want to be a purist, agriculture is not an example of perfect competition. A perfectly competitive market cannot exist since there must be an infinite number of producers and consumers in the market so no individual actor can influence the price or production. Rather perfect competition should be seen as a benchmark (much as a pure monopoly is), which we should see as the most efficient market structure, which as economists we should see as ideal for all markets to operate as.

    Even so in real life the agricultural market is not perfectly competitive since governments frequently intervene in such markets, the most obvious example being the EU's Common Agricultural Policy.

    In my opinion the closet thing to a perfectly competitive market is the international currency market i.e. the buying and selling of currencies around the world. Although even this is an imperfectly competitive market since central banks try to influence this and countries can peg their exchange rates.

    To sum up perfect competition does not exist in the real world, they are just theoretical in order that us economists can compare real world markets and which markets should strive toward.

Hope that helps.

Answer 2

The following links could be helpful.

Answer 3

In the agricultural market, there are so many buyers and sellers that no individual person can influence the price.  If a seller increases his price, no one will buy from him.  If he lowers his price, he will sell everything, but make less profit.  If he charges the same price as everyone else, he will still sell everything, but make more money.  

This is the opposite of a monopoly, where the seller gets to choose the price (for example, microsoft, or apple).