Read the following statements - Assertion (A) and Reason (R):
Assertion: In a perfectly competitive market, no individual buyer or seller can influence the market by their size.
Reasoning: There are large number of buyers and sellers in a perfectly competitive market..
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 2
The correct answer is option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
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Assertion (A): In a perfectly competitive market, no individual buyer or seller can influence the market by their size. This is true. This is a defining characteristic of perfect competition. Individual participants are price takers.
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Reasoning (R): There are large number of buyers and sellers in a perfectly competitive market. This is also true. A large number of buyers and sellers is a key condition for perfect competition.
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Relationship: The reasoning directly explains the assertion. Because there are so many buyers and sellers, each individual participant represents a tiny fraction of the market. Therefore, no single participant has the power to influence the market price.