Question

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.

Answer 1

Hey Manya, it simply means that in a perfect competitive market, there exist a large number of buyers and sellers. The number of sellers is so large that no individual firm owns the control over the market price of the commodity. Thus, firms have no role to play other than supplying the required output at the existing market price and therefore a firm is a price taker and not a price maker.The implication for this is that no individual firm can influence the market price and all firms sell their individual output at a uniform market price.