A price taker is a situation in perfect competition where a firm has no control over the price of its product. It simply takes the prevailing market price as given and adjusts its quantity of production accordingly.
One example that illustrates a price taker in perfect competition is a farmer selling wheat. In a perfectly competitive market, there are numerous farmers selling identical products (wheat) to many buyers. The price of wheat is determined by the market forces of supply and demand.
In this scenario, the farmer has no influence over the market price of wheat. They must accept the price determined by the market and adjust their production accordingly. If the farmer charges a higher price, buyers will simply purchase from other farmers selling at the prevailing market price. Similarly, if the farmer charges a lower price, they would not be able to sell all their produce.
As a price taker, the farmer has no control over setting the price and must accept the equilibrium price determined by the market. They focus on maximizing their profits by efficiently producing and selling their wheat at the prevailing market price.
Overall, the situation of a farmer selling wheat in a perfectly competitive market serves as a clear example of a price taker in perfect competition.