Price Taker Homework Help

What is Price Taker in Economics?

It refers to a buyer or a seller who has no control over the market and is in no way able to affect the price of the commodity that he is associated with.

When there is a market structure that exemplifies one who is a price taker, there is perfect competition that exists in that industry.

The only best example to explain the price taker would be the perfect competition scenario. It can also be termed as the price seeker. The other entity is the price maker. It is the one that has a command on the price that is existent in the market.

The explanation

In case there is a buyer or a seller, who has nothing to do with the market price, he would be a price taker. He would have to buy the commodities or sell the goods at the price that is existent in the market. He cannot go against the price existing already. There is no other option that is left for a price taker.

Example

The best case would be perfect competition. It has a relatively large number of people who are involved in such a market. Let us take a trade where several people are producing the same good. They all produce similar products for the market. Some participants are allowed to enter the market or leave it according to their choice. All of these participants are very well aware of the prices that are existent in the market too.

There are several buyers that one buyer has to compete with. It can be from hundreds to millions. The same is the case with the sellers too. They have to compete with hundreds of sellers millions of them. In the case of the sellers, they would not be ready to sell their goods at a price that would be lesser than the market price. This is so because they have many other buyers who are ready to take it from him at that price.

This way the buyer, in this case, has no say in the price. He has to buy it if he needs it. The same is the case with the buyers too. They would not buy it from a person who is selling it to them at a price higher than the market rates. This is because several other sellers are ready to sell it to him at the market price.

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