Reply to Classmate Post: Companies as Price Takers
Different markets have different competition types. Markets can be monopolized or in perfect competition. Monopolized markets are those in which a single firm provides all the supplies (Jain et al., 2010). On the other hand, markets that have perfect competition are those in which there exist numerous sellers and buyers. Perfect competition involves homogenous products and firms do not have control over the market price. In such a case, there is extensive competition in the market. Firms in perfect competition enjoy enterprise freedom since there is no rivalry among them.
Jain et al. (2010) explains that in a perfectly competitive market, any given firm does not determine the price of a commodity. Demand for a product and the forces of market supply determine the price of a commodity in perfect competition. The concept of product demand in the market is affected by various factors. According to Mankiw (2014), product demand is affected by such as consumer taste, prices of related goods and the number of buyers. Demand is consumer oriented. Therefore, it would be prudent to infer that buyers can influence the price of a commodity in a perfectly competitive market.
My classmate states that no market participants, both buyers and sellers, influence the market price. This assertion is partly correct. Sellers do not have influence on the market price of a commodity. They take the price that has been stipulated by the market. However, stating that buyers do not influence the price of market price of a commodity is wrong. Buyers can influence the demand for a commodity as discussed in the paragraph above. For instance, the number of buyers and taste can influence the market price.
References
Jain, T. R., Jain, T. R., Ohri, V. K., & Majhi, B. D. (2010). Principles Of Macroeconomics. FK Publications.
Mankiw, N. (2014). Principles of macroeconomics. Cengage Learning.
