Ans. Perfect competition is often distinguished from pure competition, but they differ only in degree. The first four conditions relate to pure competition while the remaining three conditions are also required for the existence of perfect competition. According to Chamberlin, pure competition means “competition unalloyed with monopoly elements,” whereas perfect competition involves “perfection in many other respects than in the absence of monopoly”.
The practical importance of perfect competition is not much in the present times for few markets are perfectly competitive except those for staple food products and raw materials.
Though the real world does not fulfill the condition of perfect competition, yet perfect competition is studied for the simple reason that it helps us in understanding the working of an economy, where competitive behaviour leads to the best allocation of resources and the most efficient organization of production. A hypothetical model of a perfectly competitive industry provides the basis for appraising the actual working of economic institutions and organization in any economy.