Final answer:
A large number of sellers selling an identical product suggests increased competition, often leading to lower prices due to the nature of perfect competition, where sellers are price takers with easy entry and exit from the market.
Step-by-step explanation:
A large number of sellers all selling an identical product implies increased competition. This scenario describes a market condition known as perfect competition. In such a market, there are many sellers and the products are identical; thus, no single seller has the power to influence the market price. Instead, sellers are price takers, meaning they must accept the market price as determined by the forces of supply and demand. Additionally, the easy entry and exit of firms in a perfectly competitive market keeps competition high.
When the number of sellers increases, competition among sellers to attract consumers tends to drive prices down. This is because each seller tries to offer a better deal to lure customers away from competitors. Lower prices can often be the result of such intense competition, as opposed to higher prices which may occur in markets with fewer sellers and lesser competition.
Furthermore, when consumer demand exceeds what is available on the market, this might initially drive prices up. In a perfectly competitive market, higher prices provide an incentive for new suppliers to enter, increase the supply and eventually bring the prices back down to an equilibrium level.