Definition of price taker , price maker and price discrimination... Pls fast tomorrow exam
Answers
Answer:
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Price taker refers to a firm or company that has no control over market price for a particular product or service.Price maker denotes a firm or company that has absolute control or power over the market price of any product or service in concern.Price discriminating firm can discriminate in charging price to different consumers based on their willingness to pay.
Explanation:
Price taking firm can be usually seen in a perfectly competitive market where high market competition or rivalry prevents the firms from charging any price for their products or services to maximize profit.Hence,every firm charges an uniform price to all the consumers and has no control or power over the market price.
Price making firm can typically seen in a monopoly market where absence of any other firm or market competition provides the leverage to the firm to choose its own price that will maximize profit for each consumer.Therefore,market competition or rivalry usually decreases the price making power of the firms.
Price discrimination basically refers to a market condition in which the firms can charge different prices to different customers based on their willingness to pay for the same product or service.The ability to price discriminate depends on the price elasticity of demand,customer price preferences,demographic features of the consumers and so forth.There are 3 types of price discrimination:1st degree price discrimination,2nd degree price discrimination and 3rd degree price discrimination.Price discrimination is usually seen in a monopoly power and requires some price making ability of the firms or companies.