Perfect competition refers to a market structure in which there are a very large number of buyers and sellers dealing in a homogeneous product, and no individual buyer or seller has sufficient power to influence the market price. The price is determined by the forces of market demand and market supply. Each firm accepts this market-determined price and is therefore called a price taker. Perfect competition represents an ideal form of market structure and is mainly used as a benchmark for analysing the working of markets. The main characteristics of perfect competition are as follows: 1. Large Number of Buyers and Sellers: There are a very large number of buyers and sellers in the market. Each seller supplies only a small proportion of the total market output. Similarly, each buyer purchases only a small proportion of total output. Therefore, no individual buyer or seller can influence the market price. 2. Homogeneous Product: All firms produce and sell identical or homogeneous products. The products are considered perfect substitutes for one another because they have the same quality, characteristics and usefulness. As a result, consumers have no reason to prefer the product of one seller over another. 3. Free Entry and Exit of Firms: Firms are free to enter the industry when they observe the possibility of earning profits and can leave the industry when they suffer losses. There are no significant legal, financial, technological or other barriers