Implication of large number of small buyers and sellers of a commodity under perfect competition
Answers
A perfectly competitive market is dominated by the presence of large number of buyers and sellers of a commodity,which means that there is no such buyer or seller in the market whose purchase or sale is so large as to impact the total sale or purchase in the market. Each buyer/seller has only a fractional share in the market demand/market supply.
Hence, price is determined by the forces of market demand and market supply. No individual buyer or seller has any control over it. Each buyer/seller has to accept the price as it is in the market.
Answer:
1. The number of buyers and sellers operating under perfect competition is very large.
2. As the number of individual sellers very large, an individual seller cannot fix the price.
3. Similarly no single buyer can fix the price or change it by his action.
4. Even if he increases or reduces demand, it will not effect total demand in the market.
5. Price of a product is determined by the interaction of total demand and total supply in the market.
Explanation:
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