Price taker

In the theory of economics ( microeconomics ) a provider as price takers (or price-taker ) is called, if he accepts the prevailing market price as given and its sales volume adjusts this price., The difference under the condition that these providers seeking profit maximization is to be maximized from revenue and variable costs. Is offered only if this difference is greater than the fixed costs. In perfect competition act all providers as price takers, since none has sufficient market power to influence the price.

Formal representation

The problem of profit maximization can be formulated as in the amount of adaptation:

Determine the optimal sales quantity x, so that the gain G (x ) = E (x) - K (x) is maximum. It refers to E ( x ) = px, the revenue function for the given market price p and K ( x) is the cost function as a function of the quantity produced.

A maximum is present if and only if

1, the first derivative of the profit function is equal to zero:

2, the second derivative of the gain function is less than or equal to zero:

It thus follows from the first condition that must be true, which leads to the following expression:

Moreover, it follows from the second with condition that must apply:

Because you have to go out in the rule of falling with increasing production volume marginal costs at the farm level, always applies to the individual providers but:

This is a contradiction to the maximum condition. It follows that there can not be an absolute maximum for the profit takers. The most important reason is the existence of economies of scale (see marginal cost ). A producer can his profit for a given price always thereby increase that he, inter alia, its production using the substitution of capital for labor expands ( law of mass production).

( With G = gain, E = revenue, K = costs and the respective derivatives, p = price)