Individuals in a market who must take the market price as given are?
The individuals in a market who must take the market price as given are called price takers. Price takers are essentially small buyers or sellers who have no influence on the market price and have to accept it as it is determined by the market forces of supply and demand.
To understand how individuals become price takers, we need to consider the concept of perfect competition in markets. In a perfectly competitive market, there are numerous buyers and sellers, all selling homogeneous or identical products. These buyers and sellers do not have any market power to influence the price. They take the prevailing market price as given and adjust their production or consumption accordingly.
Here's how price takers operate in a perfectly competitive market:
1. Homogeneous Products: In a perfectly competitive market, products are indistinguishable across producers. For example, in an agricultural market, all wheat farmers produce virtually identical wheat. This means that buyers have no reason to pay a higher price for one seller's product over another.
2. Many Buyers and Sellers: There are numerous buyers and sellers in the market, resulting in no individual player having enough market share to affect the market price. Each buyer and seller is relatively small compared to the whole market.
3. Perfect Information: All buyers and sellers have perfect knowledge about the market, including the prevailing market price. They can easily compare different prices and make informed decisions based on the current market conditions.
4. No Barriers to Entry or Exit: In a perfectly competitive market, there are no significant barriers preventing new firms from entering the market or existing firms from exiting. This ensures that the market remains competitive and no single seller can dominate the market.
Due to these characteristics, individuals in a perfectly competitive market have no control over the market price. They have to accept the prevailing price determined by the forces of supply and demand. They can only choose the quantity they want to buy or sell at that given price.
So, the individuals who must take the market price as given are the price takers in a perfectly competitive market.