Pricing and output decisions

Price is affected by demand and supply (or output). Price setting decisions are also influenced by the type of market the business is involved in.

The impact of pricing and output decisions in different market structures

As we have already seen, suppliers operating in different markets are either price takers or price makers.

What is the difference between a Price Taker and a Price Maker?

Price takers are found in perfectly competitive markets. Price makers are able to influence the market price and have the power to determine pricing.

Price makers are the opposite of price takers.

In a perfect competition, businesses are price takers and therefore have no influence over the price being set. They have to accept the market price. However, in markets where competition is imperfect there are several strategies a business can use.