Generally, a perfectly competitive market exists when every participant is a " price taker ", and no participant influences the price of the product it buys or sells. Specific characteristics may include:

•  Infinite buyers and sellers – Infinite consumers with the willingness and ability to buy the product at a certain price, and infinite producers with the willingness and ability to supply the product at a certain price.

•  Zero entry and exit barriers – It is relatively easy for a business to enter or exit in a perfectly competitive market.

•  Perfect factor mobility - In the long run factors of production are perfectly mobile allowing free long term adjustments to changing market conditions.

•  Perfect information - Prices and quality of products are assumed to be known to all consumers and producers.

•  Zero transaction costs - Buyers and sellers incur no costs in making an exchange (perfect mobility).

•  Profit maximization - Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit.

•  Homogeneous products – The characteristics of any given market good or service do not vary across suppliers.

•  Constant returns to scale - Constant returns to scale ensure that there are sufficient firms in the industry.