Perfect competition is a market where there will be existence of large number of buyers and sellers dealing with homogenous products. It is a market with the highest level of competition.

1. Large number of sellers: The first condition which a perfectly competitive market must satisfy is concerned with the sellers’ side of the market. The market must have such a large number of sellers that no one seller is able to dominate the market. No single firm can influence the price of any commodity.

The sellers will be the firms producing the product for sale in the market. These firms must be all relatively small as compared to the market as a whole. Their individual outputs should be just a fraction of the total output in the market.

2. Large number of buyers: There must be such a large number of buyers that no one buyer is able to influence the market price in any way. Each buyer should purchase just a fraction of the market supplies. Further, the buyers should not have any kind of union or association so that they compete for the market demand on an individual basis.

3. Homogeneous products: Another prerequisite of perfect competition is that all the firms or sellers must sell completely identical or homogeneous goods. Their products must be considered to be identical by all the buyers in the market. There should not be any differentiation of products by sellers by way of quality, colour, design, packing or other selling conditions of the product.

4. Free entry and free exit for firms: Under perfect competition, there is absolutely no restriction on entry of new firms in the industry or the exit of the firms from the industry which want to leave. This condition must be satisfied especially for long period equilibrium of the industry. If these four conditions are satisfied, the market is said to be purely competitive. In other words, a market characterized by the presence of these four features is called purely competitive. For a market to be perfect, some conditions of perfection of the market must also be fulfilled. 

5. Perfect mobility: Another feature of perfect competition is that goods and services, as well as resources, are perfectly mobile between firms. Factors of production can freely move from one occupation to another and from one place to another. There is no barrier on their movement. No one has monopoly or control over the factors of production. Goods can be sold at a place where their prices are the highest. There should not be any kind of limitation on the mobility of resources. 

6. Absence of transport cost: For the existence of perfect competition, the transport costs should, not be considered. All the firms have equal access to the market. Price of the product is not affected by the cost of transportation of goods. 

7. Single price: The market price charged by different sellers does not differ due to location of different sellers in the market. No seller is near or distant to any group of buyers. 

8. Price taker: The firms in the perfect competitive market are price takers. That means the producers will continue to sell their goods and services in the price existing in the market. Firms have no control over the price of the product. 

9. Absence of selling cost: Under conditions of perfect competition, there is no need of selling costs. Selling costs are the expenditures done to stimulate the sale of product or to change the shape of the demand curve. We know that under perfect competition, goods are completely homogeneous. When they cannot change the price and when their goods are completely similar, firms need not make any expenditure on publicity and advertisement. 

10. Normal profit: The firms in perfect competition will be earning normal profit. The normal profit is that profit which is just sufficient to stay in the market.