The Price Taker Has No Control Over the Pricing in Marketplaces Discussion
I’m working on a health & medical discussion question and need an explanation and answer to help me learn.
- Using a hospital to illustrate your answer, explain the difference between a price setter and a price taker.
- Can most providers be classified strictly as a price setter or a price taker?
- Explain the difference between full-cost pricing and marginal cost pricing strategies.
A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. All economic participants are considered to be price-takers in a market of perfect competition or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market. This holds true for producers and consumers of goods and services and for buyers and sellers in debt and equity markets.
In the stock market, individual investors are considered to be price-takers, while market-makers are those who set the bid and offer in
a security. Being a market maker, however, does not mean that they can set any price they want. Market makers are in competition with one another and are constrained by the economic laws of the markets like supply and demand.
In most competitive markets, firms are price-takers. If firms charge higher than prevailing market prices for their products, consumers will simply purchase from a different lower-cost seller to the extent that these firms all sell identical (substitutable) goods or services.
Grain markets such as for wheat are a prime example of a good that is almost identical in quality between its many sellers, so the price of grain is determined by competitive activity in domestic and global markets and commodities exchanges.
In the case of wheat, low-cost producers will have a competitive advantage in that they will be able to drive out high-cost producers and take their market share by offering progressively lower prices. Technological innovation that lowers the cost of production is part of the process of competition whereby capitalist firms have no choice but to be price takers.
The market for oil is slightly different. While oil is competitively produced as a standardized commodity on a global market, it has steep barriers to entry as a seller, due to the high capital costs and expertise needed to drill or refine oil, as well as the high bidding price of oil fields.
As a result, there are relatively few oil-producing firms compared to wheat farmers, and so most consumers of gasoline and other petroleum-products are the price-takers—they have few producers to choose from outside a handful of global companies. The Organization of Petroleum Exporting Countries (OPEC) also has great power to move prices up and down through controls on output. This underscores how a consumer is price-taking to the extent that he can’t or doesn’t want to produce the good on his own.
Important information for writing discussion questions and participation
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Your initial discussion post should be a minimum of 200 words and response posts should be a minimum of 150 words. Be advised that I grade based on quality and not necessarily the number of words you post. A minimum of TWO references should be used for your initial post. For your response post, you do not need references as personal experiences would count as response posts. If you however cite anything from the literature for your response post, it is required that you cite your reference. You should include a minimum of THREE references for papers in this course. Please note that references should be no more than 5 years old except recommended as a resource for the class. Furthermore, for each discussion board question, you need ONE initial substantive response and TWO substantive responses to either your classmates or your instructor for a total of THREE responses. There are TWO discussion questions each week, hence, you need a total minimum of SIX discussion posts for each week. I usually post a discussion question each week. You could also respond to these as it would count towards your required SIX discussion posts for the week.
I understand this is a lot of information to cover in 5 weeks, however, the Bible says in Philippians 4:13 that we can do all things through Christ that strengthens us. Even in times like this, we are encouraged by God’s word that we have that ability in us to succeed with His strength. I pray that each and every one of you receives strength for this course and life generally as we navigate through this pandemic that is shaking our world today. Relax and enjoy the course!
Please read through the following information on writing a Discussion question response and participation posts.
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Important information on Writing a Discussion Question
- Your response needs to be a minimum of 150 words (not including your list of references)
- There needs to be at least TWO references with ONE being a peer reviewed professional journal article.
- Include in-text citations in your response
- Do not include quotes—instead summarize and paraphrase the information
- Follow APA-7th edition
- Points will be deducted if the above is not followed
Participation –replies to your classmates or instructor
- A minimum of 6 responses per week, on at least 3 days of the week.
- Each response needs at least ONE reference with citations—best if it is a peer reviewed journal article
- Each response needs to be at least 75 words in length (does not include your list of references)
- Responses need to be substantive by bringing information to the discussion or further enhance the discussion. Responses of “I agree” or “great post” does not count for the word count.
- Follow APA 7th edition
- Points will be deducted if the above is not followed
- Remember to use and follow APA-7th edition for all weekly assignments, discussion questions, and participation points.
- Here are some helpful links
- The is a great resource