When a firm under perfect competition raises its price above the market price, its buyers switch to other firms, and no ‘adjustment’ problems arise. This is because:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → there are so many other firms to take up their demand
All firms sell the same good and buyers know the market price. So when one firm charges more, its buyers move to other firms. With so many other firms in the market, this extra demand is readily accommodated, and nobody faces a shortage.
NCERT (2026-27): “4.1 Perfect Competition: Defining Features … Suppose, now, that a certain firm raises its price above the market price. Observe that since all firms produce the same good and all buyers are aware of the market price, the firm in question loses all its buyers. Furthermore, as these buyers switch their purchases to other firms, no “adjustment” problems arise; their demand is readily accommodated when there are so many other firms in the market.” |