Perfect competition is that condition of market where there are large numbers of buyers and sellers who have full knowledge of market. In perfectly competitive market, same type of products are available which are sold or bought at the same price (at a particular time). In this condition, there is no role of firms and individual buyers for determining price. In this condition, the transportation costs are zero and full mobility is found in resources. There is no obstacle in entry or exit of new firms and old firms.
If we focus on these features, then it is clear that these conditions are not seen in actual life. This condition can be an ideal condition, but it is impossible to be found in actual life. That’s why condition of perfect competition is called imaginary condition. Its study can have the theoretical significance, but there is no practical significance of this concept.
