Conditions for a perfectly competitive market
Social cost–benefit analysis seeks in principle to value all goods and services as if
they were traded in perfectly competitive markets – such market prices are seen as
reflecting social valuations. A perfectly competitive market in economics is not
directly observable. An important criterion for a perfectly competitive market is
that interaction between demand and supply determines the price, not any
specific producer or consumer. In other words, in a perfectly competitive
market, everyone is a price-taker rather than a price-maker.