Question

Explain the following feature of perfect competition:

Large number of buyers and sellers

Answer 1

There are a large number of buyers and sellers of the commodity. The number is so large that none of them can influence the prevailing market price. The words 'large number' imply that the number of sellers is so large that a single seller's share in total market supply of the product is insignificant. Similarly, a single buyer's share in total market demand is insignificant.

The implication of this feature is that neither a single seller nor a single buyer influences the market price on his own. No individual seller can influence the market price by reducing or raising its own supply. Similarly, no single buyer can influence the market price by changing his demand. This makes the sellers as well as buyers as price-takers.