Answer:
In a perfectly competitive market, the answer is A. Both the buyers and the sellers are price takers.
To understand why both buyers and sellers are price takers in a perfectly competitive market, it's important to first understand what a perfectly competitive market is and what it means to be a price taker.
A perfectly competitive market is a theoretical concept in microeconomics that describes a market structure where competition is at its highest possible level. It's characterized by several key features:
1. There are many buyers and sellers in the market, none of whom have significant market power or the ability to influence the price of the good or service being traded.
2. The goods or services offered by the various sellers are largely identical or homogeneous. This means that buyers see no real difference between products offered by different sellers.
3. There is perfect information available to all participants in the market. This means that all buyers and sellers have complete knowledge about the prices, quality, and availability of goods or services in the market.
4. There are no barriers to entry or exit in the market. This means that new sellers can easily enter the market if they see an opportunity for profit, and existing sellers can leave if they're not making enough money.
5. Buyers and sellers are rational, aiming to maximize their own benefits - buyers aim to maximize their utility (satisfaction) from goods or services they purchase while sellers aim to maximize their profits.
In such a market, both buyers and sellers are considered "price takers". A price taker is an economic term that refers to a market participant that has no control over the price of the product it buys or sells because its decisions do not influence the price. They take or accept the market price as given.
The reason why both buyers and sellers are price takers in a perfectly competitive market lies in its characteristics:
1. Because there are many buyers and sellers, no single buyer or seller can influence the market price. Each buyer's individual demand or each seller's individual supply is too small relative to the total demand or supply in the market.
2. Because products are identical, buyers have no preference for one seller over another except for price. If a seller tries to charge more than the going rate, buyers will simply buy from another seller.
3. Because there's perfect information, all participants know the prevailing market price and cannot be persuaded to pay more (for buyers) or accept less (for sellers).
4. Because there are no barriers to entry or exit, if any firm tries to set a higher price, new firms will enter the market offering lower prices, driving down the overall market price until it reaches equilibrium again.
Therefore, in a perfectly competitive market, both buyers and sellers must accept whatever price prevails in the market - they are both "price takers".