What is the difference between perfect competition and imperfect competition?

Some characteristics of a perfectly competitive market structure are: (i) Firms supply homogenous goods. This means that each firm essentially sells the same good and there is no way of differentiating the product. An example of this would be a market in which firms only supply carrots. (ii) There are many buyers and sellers. Many sellers mean that each firm in the market supplies a low output and therefore cannot influence the market price. Hence, firms in a perfectly competitive market are price takers. Many buyers mean that any given buyer has no influence over the market price and is also a price taker. (iii) There are no barriers to entry and exit. Therefore, if overall profits in the market are positive, new firms can freely enter the market without incurring any costs. Similarly, if overall profits in the market are negative, then firms can freely exit without incurring any costs. Hence, profits are normal (zero) in the long run.In reality, virtually all markets are imperfect and move away from the case of perfect competition. Some characteristics of an imperfect market include: (i) Differentiated products. In reality, firms have brand value and loyalty, which means they have a degree of market power and can set their own prices. (ii) The market may be a monopsony, which means that there is one sole buyer or only a few buyers. Therefore, buyers can influence the market price. (iii) Significant barriers to entry and exit. For example, to open a café on a high street a firm would have to pay rent and meet health and safety standards before being able to operate. Therefore, profits are usually supernormal (positive) for a small number of firms.