State the main features of a Perfectly Competitive Market.

Perfect Competition: It is a situation in which a large number of sellers and buyers selling a homogeneous product at a uniform price.

Main features of Perfect Competition:

(i) A large number of Buyers and Sellers: There are so many buyers and sellers that no individual buyers or sellers can influence the price of the commodity in the market.

(ii) The Products are Homogeneous: All the firms in the perfectly competitive market sell homogeneous (identical) products. The products are perfect substitutes for one another.

(iii) Free Entry and Exit to Firms: The industry is characterised by freedom of entry and exit of firms. Firms have freedom of movement in and out of an industry.

(iv) Buyers and Sellers have Perfect Knowledge: Firms have complete knowledge about the product market and factor market. Buyers also have perfect knowledge of the product market.