Perfect competition is defined by four conditions (in a well-defined market):
a) There is such a large number of buyers and sellers that none can individually effect the market price. This means that the demand curve facing an individual firm is perfectly elastic.
b) In the long run, resources must be freely mobile, meaning that there are no barriers to entry and exit.
c) All market participants (buyers and sellers) must have full access to the knowledge relevant to their production and consumption decisions.
d) The product should be homogenous.
When these conditions are fulfilled in any well-defined market, the market is perfectly competitive; when they are fulfilled in all markets, the economy is perfectly competitive.