Perfect competition is basically a form of market in which large number of sellers are selling homogenous product.
Following are the characteristics of perfect competition market.
Characteristics of Perfect Competition Market:
Homogeneity of Good or Product:
All the units of the product sold in the market must be similar to each other in weight, size, quality etc. also price of every unit of commodity must be equal to price available in market for sale.
Free Entry and Exit:
Under the perfect competition entry of new firms should be completely free without any entry barriers; old firms could leave the market according to their will and there should be no restriction on entry and exit of the firms.
Large number of Buyers and Sellers:
Under the perfect competition the condition of large number of buyers and sellers must be fulfilled, this way no seller can sale a product on its own price. Thus, price of products in market will remain unaffected.
Perfect Knowledge about Market:
Under the perfect condition every buyer and seller must be fully aware of the market conditions. Complete awareness of market about the price and quality of the product will help both buyer and seller. Also no party will be able to exploit the position of the other party.
Elasticity of Factors of Production:
In perfect competition the factors of production are supposed to be more elastic in supply. The supply of these factors can be adjusted in the market according to the demand.