In a competitive market, what defines a price taker?

In a competitive market, a price taker is defined as a seller who has no influence on the market price. This is characteristic of perfectly competitive markets where there are many buyers and sellers, and each seller offers a homogeneous product. Because of this competitive environment, individual sellers must accept the market price as given—they cannot raise prices without losing all their customers to competitors, nor can they lower prices if they want to maximize their profits.

In essence, the dynamics of the market ensure that the price is determined by the overall supply and demand, and individual sellers must adapt to this price structure. This concept highlights the degree of competition present, as well as the limitations of individual seller's power within the market. In contrast, participants who can set prices or dictate pricing are typically found in monopolistic or oligopolistic markets where fewer sellers have more market power.