Sub: Economics Topic: Micro Economics
Question:
Market structures are price makers and price takers
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Explain which market structures are price makers and price takers. What is the difference in the
demand curves and why.
Solution:
Explain which market structures are price makers and price takers. What is the difference in the
demand curves and why.
The monopoly market structure is the price makes and the perfectly competitive market
structure is the price takers.
The demand curve for the competitive market is horizontal. The firms have to accept the price
determined by the industry demand and industry supply. Thus the demand curve for the
competitive firms is horizontal and perfectly elastic. It is a price taker that can sell as much or as
little as it wants at the going market price.
On the other hand, the demand curve for the monopolist is downward sloping. The monopolist,
being the sole seller in the market can determine both price and quantity. Thus the demand
curve for the monopolist is the market demand curve and downward sloping.
** End of the Solution **
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