in a compertative market,industry is a price maker and a firm a price taker?what is the relevence of large number of sellers in this context.
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Answer: A firm is said to be a price-taker if it has to accept the price, as determined by the market forces of demand and supply. Answer: A price taker firm is one which has no option but to accept the price as determined by the industry as in perfect competition.
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Under perfect competition, the price of the commodity is determined by the equilibrium between demand and supply of the industry. No individual firm can influence the price as he has the insignificant share of the total quantity of a commodity. Thus a firm has to accept the price as determined by the industry. Therefore it is said that a firm under perfect market is a pricetaker.
The presence of a large number of buyers and sellers is an important condition of a perfectly competitive market. It indicates that every buyer and seller is so small relative to the entire market that he cannot affect the market price by changing his purchases or output.
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