Questions
Explain the implications of the following in a perfectly competitive market :
Large number of sellers
Explain the implications of the following:
Large number of sellers in perfect competition.
There are a large number of sellers in a perfectly competitive market. Explain the significance of this feature
Solution 1
Large number of sellers in perfect competition:-
There are a large numbers of sellers, but the supply of an individual firm is only a small fraction of the whole market supply. Here, an individual seller cannot influence the market price by varying the sale in the market. Hence, a firm can supply any amount of goods at the given price. They are only price takers but not price makers.
Solution 2
A perfectly competitive market is a market which consists of buyers and sellers. They produce a homogeneous product. When the number of buyers is more, the demand for an individual buyer is only a small portion of the market demand. Individual buyers cannot influence the market price of a good by varying their demands, and thus, an individual buyer is a price taker and not a price maker
