Following are the four characteristics of perfect competition market:

(a) Large Number of Firms In perfect competition, there are large number of firms in the industry. A single firm is not in a position to influence the price of the product by increasing or decreasing its output. The individual firm under perfect competition therefore takes the price of the product as a given datum and adjusts its output to earn maximum profits. In other words, a firm under perfect competition is price taker and output adjuster.

(b) Homogenous ProductIn perfect competition, the products produced by all firms in the industry are fully homogenous and identical. It means that the products of various firms are indistinguishable from each other; they are perfect substitutes for one another.

(c) Perfect KnowledgeBuyers and sellers are fully aware of the price prevailing in the market. Buyers know it fully well at what price sellers are selling a given product. As a consequence, only one price prevails in the market.

(d) No Extra Transport Cost For one price to prevail throughout the market, it is essential that there is no extra transport cost for the consumers while buying a commodity from different sellers.