Price Maker Homework Help

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What is a Price Maker in Economics?

If there is a buyer or a seller who has good control over the market that he can influence the change in the price of that item, he is called the price maker. In the case of the selling side, the monopoly would be a good example.

In the case of the buying side, the best example would be that of monopsony. These are the two good ways of explaining the concept of price makers in the market. They are also called the price setters. The other concept that exists is the price takers.

It is the market control that is essential in the case of the price makers. In the case of the buyers who are having control in the market, the demand curve would be negatively sloped.

It would be possible to take any price-quantity combination on the curve. In the case of the seller, the supply curve would be a positively sloped one. It also has the possibility to take any price-quantity combination on the curve.

 

What is the seller's’ side

In the case of the selling side, the monopoly is something that is deciding the prices. It would be the best price maker. As it is the only seller in the whole market, it would have command over the prices that it would set. The people who are in need of it would have to buy the product without any other way. Even the firms that are oligopolistic or under monopolistic competition are included under the price makers. But that would be only up to a certain degree. It would depend on how far they have control over the market.

 

What is the buyers’ side

In this, the best example for the price-makers would be a monopsony. There are other examples too. They would be the oligopsony and monopsonistic competition. They may not be doing it to that great an extent as in the case of monopsony.

This is so because, in the case of monopsony, they are the only buyers in the market. If they are ready but they will. In case they find the price to be too high, they would not. In that case, the sellers will try to reduce the price in order to let their only customer buy the product from them.

Though the price maker has the capacity to control the prices in the market, he cannot do it completely. It is not possible for any quantity for any object, but for certain quantities for a certain object only.'

 

Price Maker Homework Help

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