Explain the implications of the following in a perfectly competitive market :

(a) A large number of sellers:

(b) Homogeneous products:

OR

Explain the implications of the following in an oligopoly market :

(a) Barriers to entry of new firms

(b) A few or a few big sellers

A)A large number of seller:

● It implies that the number of firms is so large that they are enough so that contribution to the total output of the industry by any firm individually is negligible.

● No single firm is in a position to influence the price in the market on its own by changing its own output.

● So, the price remains constant.

B) Homogeneous products:

● It means that the buyers treat products of all the firms same i.e, homogeneously.

● No firm can charge a higher price, because then the price will stop purchasing it from him, and may shift to another seller.

● The market price remains the same for all the firms.

OR

a) Barriers to entry of new firms:

● The barrier to entry of new firms allows only a limited number of firms into oligopoly industries.

● These barriers can be the patent rights, availability of certain raw materials etc.

b) A few or few big sellers:

● It implies that each big seller contributes a large share of the total output.

● This gives the individual seller the power of influencing the market price by changing its own output.