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What are the characteristics of an efficient market?

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Question added by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date Posted: 2014/04/06
Rajiv Yajnik
by Rajiv Yajnik , Vice Pesident Fmcg & Sugar , EID Parry India Ltd

Hi Sir..

A market is said to be efficient if it operates under pure competition and the following four conditions are satisfied: 1) Numerous participants- each seller and puchaser constitutes so small a proportion of the total market that his output or purchase decisions have no effect on the price. 2) Homogeneity of product- as far as any buyer is concerned, the product offered by any one seller is identical to that supplied by every other seller. As a result, the buyer does not care whom he buys. 3) Freedom of entry and exit- new firms desiring to enter the market can do so on terms as good as those available to firms already there. Similarly, if production and sale of goods proves to be insufficiently profitable, there are no special impediments preventing firms from leaving the market. 4) Perfect information- each firm and each customer is well informed about the available products and their prices.

Rgds

Rajiv

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