This is what has since been termed the long period aspect of competition, the process whereby capital and labour are moved from one activity to another taking considerable time. In contrast, the short period aspect of competition concerns the way markets operate. It embodies a static notion of competition, for the process whereby price differences are eliminated is ignored. Like the law of one price, and in contrast to what the classical economists understood by competition, perfect competition is a static concept. It is not a process but a type of market in which each agent is so small as to be unable to influence the price at which goods are bought and sold.
Agents are price-takers.
It is contrasted with imperfect competition, a state in which individual agents are sufficiently large to be able to have some control over the price of what they are buying or selling. Economists have explored, with great rigour, the conditions under which perfect competition will occur. Perfect competition was, at least until the 1980s, the almost universally used assumption about market structure in diverse areas of economics such as international trade, inflation and unemployment. Nowadays the most widely accepted solution to this problem is to use game theory. While the focus of most economic theory has been on perfect competition, dynamic aspects of competition such as concerned Smith and the classical economists have not been neglected.