How does the concept of 'survival of the fittest' apply to perfect competition?

In perfect competition, 'survival of the fittest' applies as firms must constantly strive to be efficient to survive and thrive.

In the context of perfect competition, the concept of 'survival of the fittest' is closely linked to the efficiency of firms. Perfect competition is a market structure characterised by a large number of small firms, homogeneous products, and free entry and exit. In such a market, firms are price takers, meaning they have no control over the price of the product they sell. This is determined by the market forces of supply and demand.

The 'survival of the fittest' concept, borrowed from evolutionary biology, suggests that only the most efficient firms will survive in the long run. In perfect competition, this means firms must constantly strive to minimise costs and maximise output. If a firm is unable to do this, it will not be able to compete with other firms that can produce at a lower cost. This could lead to the firm making losses and eventually exiting the market.

Furthermore, in perfect competition, there is complete information available to all participants. This means that consumers are fully aware of the prices and products on offer, and will always choose the product that offers them the best value. Therefore, firms must not only be efficient in their production, but also in their product quality and service. If a firm fails to meet the expectations of consumers, it will lose market share to its competitors.

In addition, the concept of 'survival of the fittest' in perfect competition also applies to innovation. Firms must constantly seek to innovate and improve their products and processes in order to stay ahead of their competitors. Those that fail to innovate may find themselves unable to compete effectively, leading to a decline in their market share and potentially their exit from the market.

In conclusion, the concept of 'survival of the fittest' is highly relevant in perfect competition. Firms must constantly strive to be efficient, meet consumer expectations, and innovate in order to survive and thrive in the market. Those that fail to do so may find themselves unable to compete effectively, leading to their exit from the market.