In perfect competition, why can't the sellers charge lower price than the price fixed by the industry?
Dear student,
The market price of any product is determined solely by supply and demand in the entire market and not by the individual seller or industry. In such scenario, if a seller 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. A seller will not sell below the equilibrium price either. Why would he? When he can earn profit at the equilibrium. Even if he chooses to sell below the equilibrium price, he will lose his opportunity to maximise his profit.
regards,
The market price of any product is determined solely by supply and demand in the entire market and not by the individual seller or industry. In such scenario, if a seller 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. A seller will not sell below the equilibrium price either. Why would he? When he can earn profit at the equilibrium. Even if he chooses to sell below the equilibrium price, he will lose his opportunity to maximise his profit.
regards,