Assertion (A): A buyer in a perfectly competitive market cannot ask for a price below the market price.
Reason (R): No firm will be willing to sell below the market price since they are all price takers.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1:Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A
- In a perfectly competitive market, buyers are price takers, meaning they must accept the market price as given. If a buyer tries to negotiate for a lower price, no firm will agree because firms are also price takers and cannot sell below the market price.
- Firms in perfect competition produce identical products and have no control over the price. If one firm were to sell below the market price, it would only reduce its own revenue unnecessarily, as it can already sell as much as it wants at the market price.
- Therefore, R correctly explains why A is true—no firm is willing to sell below the market price, so a buyer cannot successfully ask for a lower price.