Firms operating in perfectly competitive markets are price takers
A price taker must accept the market price set by supply and demand. It cannot charge more or less than every other seller.
Formula
AR = MR = Price (for a price taker)
Real World
A cocoa farmer in Ghana selling into the global commodity market must accept the price shown on the ICE Futures exchange — attempting to charge above market price would result in zero sales.
Exam Focus
Show the firm's demand curve as perfectly elastic (horizontal) and label it AR = MR = P to demonstrate price-taking behaviour on a diagram.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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