Price Taker

Price Taker

In business, a price taker refers to a producer or supplier that is forced to take i.e. accept the market price as dictated by buyers because they are not able to exercise sufficient pricing power. Price takers operate in contexts where there is perfect competition (cf.) i.e. markets of differentiated products (no emotional attachments) in environments of low barriers to entry (lots of sellers) and perfect information. Suppliers pricing above the market price will lose buyers. Pricing below the market price will not yield additional demand to offset the difference. Their only recourse to drive up profits is to increase production assuming they can do so at a reasonable marginal additional cost and then sell at the market price.

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