What characteristics might a perfectly competitive market have? Choose 3 (6 marks)
The first characteristic is that the products are homogenous, meaning there is little difference between the quality of the goods being sold by the individual firms.
The second characteristic is that all the firms are price-takers: they have no ability to affect demand, and as a result demand is perfectly price elastic.
One final feature of a perfectly competitive market is that firms are only capable of making abnormal profit in the short run - this will be eroded over time, through profit signalling, meaning all firms achieve normal profit in the long run.
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