Give reasons or explain:
5. Sellers and the buyers are price takers in perfect competition.
Answer:
There exist a large number of buyers and sellers in a perfect competitive market. The number of sellers is so large that no individual firm owns control over the market price of the commodity. Due to the existence of a large number of sellers in the market, there exists perfect and free competition in the market. The firm acts as a price taker and the price is determined by the ‘invisible hands of the market’, i.e., by the demand and supply of commodities.
Similarly, the number of buyers is so large that no single buyer can influence the price in the market. He accepts the price at which the firms sell the commodity.
