What are the characteristics of a perfectly competitive market?

A perfectly competitive market has the following characteristics.

(i) The market consists of buyers and sellers who are price takers.

(ii) Each firm in the market produces undifferentiated and homogenous products.

(iii) Buyers and sellers have perfect information about the price prevailing in the mark! About the availability of commodities at any given point of time.

(iv) Firms can enter or exit the market freely.

Implications:

The implications of all these features is that there is single price in the mark no individual buyer can change it. On this price a firm can sell any amount of output. Because of flu demand of a firm is perfectly elastic and hence a horizontal line at the market price. Another implication is that a firm will produce only when it is profitable to produce, otherwise it will stop the products.