A perfectly competitive market is that type of market in which there are large number of buyers and sellers engaged in buying and selling homogeneous product without any restriction on entry in and exit from the market.

The characteristics of search market are -

a) Large number of buyers and sellers - The buyers and sellers are so large that a single buyer or seller could not influence the market price. A single purchaser or seller is just like a drop of water in an ocean.

b) Homogeneous product - It means all the forms are engaged in selling homogeneous product that is a products which are identical to each other or are standardised or say which can be substituted with each other so the buyer is not at all ready to pay any extra amount for the product who's close substitute is available.

c) Free entry and exit - The firms are free to enter into the market and to leave the market. The firms who have the chances to earn more profit enter the market and the one who suffers loss leaves the market.

d) Perfect knowledge - The buyers and sellers must possess complete knowledge about the prices at which goods are being bought and sold and also the price at which others are prepared to buy and sell.

e) Transportation Cost - The transport cost is either Zero OR negligible.

f) Perfect mobility of factors of production - The factors of production are perfectly mobile between the industries.

In perfectly competitive market the sellers are price taker not the price making. However perfect competition is purely a myth, this type of market do not exist.