Give reason "Sellers and buyers are the price takers in perfect competition".
Answers
Answer:
Explanation:
A market which features a large number of buyers and sellers of a similar product is termed as a perfectly competitive market.This implies that since the number of sellers are significantly high in such market, the output of any single seller contributes a small part of the total output of the product.
The following are some of the reasons which indicates "Sellers and buyers are the price takers in perfect competition"
1) Huge number of buyers:
Under this market competition there are many buyers as a result one buyer cannot determine the product price as an individual demand is far too small of total market demand.
2) Huge number of sellers
There are huge number of sellers under this market competition who sells their product in the market. Since the number of sellers are too high, a sole seller cannot create its influence on the market price of the product, because every seller contributes a very small part of total market supply. The seller under this market is known as a price taker and not a price maker because the price of the product is influenced by its market supply and demand which is accepted by the firms.
3) Similar product:
All firms under this market condition produce and sell uniform products, in respect of shape, size, color, quality, etc as a result all the commodities are considered as a perfect substitute for one another.
Hope this helps.