ECONOMICS, PERFECT COMPETITION AND ITS IMPACT ON BUSINESS Introduction Economics, in its most basic form, is defined as the allocation of resources. Beyond this definition, there are a whole host of other definitions that try to describe everything from buyer behavior to how the market will behave if too much product is out there. Then there is the concept of perfect competition, bookended on the other side by monopoly. Though these two might seem to be worlds apart in theory, we'll demonstrate in this paper that they are actually closer than it might seem at first. We'll also try to determine the impact of perfect competition on business – and on demand. Is it possible for a company to use the benchmark of perfect competition to help its business? Yes – over the short term. But in this paper we'll prove that a company that believes it is behaving as though it were in a perfect competition market over the long term could find itself in some trouble. Perfect Competition: Definition Perfect competition, also referred to as "pure competition" is more theory than reality – it's more of a benchmark against which other market structures are compared (Investopedia, 2008). A market structure that defines perfect competition is one in which the following is met: All companies are selling the same thing. All firms are price-takers. All the companies have a fairly small market share. The buyers know the nature of the product being sold, and how much each firm is charging. The industry has no barriers to entry – companies can enter and exit at will (Investopedia, 2008). Another definition of perfect competition is an industry in which each firm in an industry take