Question

Using the definition of a price taker as your guide, explain why each of the following
industries meets or does not meet the criteria?
i) University Education
ii) Wheat Industry
iii) Restaurants

Answer 1

First according to economics, price taker is a company or a business that accept market prevailing prices, its transaction is unable to affect the market price.

For this case:-

1. University Education: Does not meets all the requirement and their fee structure varies from one university to another which affects the student's choice in joining.
2. Wheat Industry : This meets all the criteria and is a real price taker since it can decide the market price of wheat in the market considering their production input.
3. Restaurant : This does not meet the criteria and they don't affect market price since they have a fixed price from the producer.