It refers to a buyer or a seller that 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, then there is a 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 which 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 in 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 the perfect competition. It has a relatively large number of people who are involved in such a market. Let us take a trade where there are a number of people producing the same good. They all produce the similar products for the market. There are participants who are allowed to enter the market or leave it according to their choice. All of these participants are very well aware about the prices that are existent in the market too.

 

There are a number of buyers that one buyer has to compete. It can be from hundreds to millions. The same is the case with the sellers too. They have to compete with hundreds of sellers to millions of them. In case of the sellers, they would not be ready to sell their goods at a price that would be lesser than that of 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 really needs it. The same is the case with the buyers too. They would not buy it form a person who is selling it to them at a price higher than the market rates. This is because there are a number of other sellers who are ready to sell it to him at the market price.