| Explain the implications of large number of buyers in a perfectly competitive market. |
| Or |
| Explain why there are only a few firms in an oligopoly market. |
Answer:
The implication of large number of buyers in a perfectly competitive market is that no individual buyer can affect the market demand for a commodity. In a perfect competition market, the number of buyers is so large and each individual buyers purchases only a small portion of the total output. As a result, no single buyer can influence the prevailing market price. He can only decide the quantities of the commodity to purchase and cannot influence the existing price. Or Under oligopoly there are only a few large firms, each produces a significant portion of the market output. There are some barriers, such as patents, large capital requirement, control over raw material, etc. which prevent new firms from entering into industry. Small firms, in general, do not survive because of the threat of competition, though they are independent to exist.
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