Explain the implications of the following in a perfectly competitive market
(a) Large number of sellers
(b) Homogeneous products.
(a) A perfectly competitive market is a market which consists of buyers and sellers. They produce a homogeneous product. When the number of buyers is more, the demand of an individual buyer is only a small portion of the market demand. Individual buyers cannot influence the market price of a good by varying their demands, and thus, an individual buyer is a price taker and not a price maker.
(b) In a perfectly competitive market, buyers will treat the products of all the firms in the market as homogeneous. There is zero degree of product differentiation and the firm cannot take any control of the price. Here, the firm does not involve in advertisement and sales promotion activities. Hence, uniform price prevails in a perfectly competitive market for homogeneous products.
