Characteristics of Perfect Competition:

From the definition of perfect competition provided in the preceding section, the main characteristics or essential features of perfect competition can be identified as follow:

(i) Large number of buyers and sellers: There are many buyers and sellers in the market to the extent than no single buyer or seller can influence the product price. Thus, all buyers and sellers are described as price-takers.

(ii) Homogeneous product: The products of all firms must be identical in the eyes of the consumers. Hence, it makes no difference which firm they purchase from, and especially since no factor other than price will influence their purchasing decision.

(iii) Perfect mobility of resources: There must be perfect mobility of factors of production so that firms can move freely into or out of the market (i.e. free entry and exist).

(iv) Perfect knowledge of all relevant information: All buyers and sellers must have adequate knowledge of existing market conditions. That is, the firms must know technological conditions of production, price of inputs and price at which the product can be sold, while all buyers must know where they can get the product to buy and at what price.