When firms in a market do not have sufficient market power to be able to influence the market price and as a result charge the optimal price in order to maximise profits. All firms in a perfectly competitive market are classified as price takers due to size of the market and close substitutes available to each firm's product.
Below is a diagram to illustrate price takers in a perfectly competitive market. These firms have to accept the market price as given due to the fact that they are in a market with hundreds of firms all producing a homogeneous product and therefore no firm has sufficient market power or control to set their own prices.
