ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -All firms are price takers (they cannot influence the market price of their products). Market share has no influence on prices. Buyers have complete or perfect information (in the past, present, and future) about the product being sold and the prices charged by each firm.

Detailed explanation-2: -The assumptions of the perfectly competitive model ensure that each buyer or seller is a price taker. The market, not individual consumers or firms, determines price in the model of perfect competition. No individual has enough power in a perfectly competitive market to have any impact on that price.

Detailed explanation-3: -Since standardized products are homogenous, a single producer cannot increase the price of their good or service without losing all sales to the competition. It implies that price-taking firms face perfect price-elasticity of demand.

Detailed explanation-4: -In a purely competitive market, there are large numbers of firms producing a standardized product. Market prices are determined by consumer demand; no supplier has any influence over the market price, and thus, the suppliers are price takers.

Detailed explanation-5: -A perfectly competitive firm is known as a price taker because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors.