Price Maker

Categories: Company Management

There are two types of firms in this world: price makers and price takers.

Price takers are firms that have to just accept the market price, because competition is fierce. If you have a hot cocoa stand in Russia and try to sell hot cocoa for $3 instead of the market price of $2, you’re not going to get any customers. You have to just take the market price of $2.

Price makers are the opposite: they pick the prices, and the customers come to them. How? Well, price markers have some control over things in their market. They might be a monopoly, the only one selling what they’ve got. Or a colluding oligopoly...like if you and all of the other hot cocoa stands colluded together to make every cup of cocoa $3.

More commonly, you can find price makers in the free-ish market when products are differentiated. For instance, Apple is a price maker because they’ve differentiated their Apple products. Sure, there are other computers and smartphones out there, but when you buy an Apple product, you’re not just buying the object for functional use. You’re also getting a sleek machine with the attached social status, which people are willing to pay more for. Basically, Apple made its own little monopoly by differentiating its products, which makes them price makers rather than price takers.

Sometimes you just have to grab prices by the...apples. And, uh...make apple juice.

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Econ: What is General Price Level?4 Views

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And finance Allah shmoop What is general price level You

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go to the sort of by your usual weekly staples

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canned chili caramel dip frozen bananas pickled kiwi Ryan's and

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replacement anima tubes Every week you buy the same things

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weekend week out Your grocery cart has the same four

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items It's been like this for years Same stuff every

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week You're a creature of habit And yes you have

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those digestive problems that you might want to check out

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But that's for another video OK overtime prices for the

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individual items move in all different directions Prices for some

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of the items might go up while prices for others

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might go down even when everything moves in the same

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direction While the prices don't change at the same rate

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some see big jumps in price Some barely see moves

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at all For instance in the past year the price

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of a can of chili rose from a buck forty

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six to a buck forty nine an increase of about

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two percent No big deal however Pickled kiwi rinds have

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jumped to seven dollars Sixty nine cents from seven dollars

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nine cents an increase of nearly eight and a half

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percent Yeah much bigger deal Meanwhile the price of anima

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tube's actually fell during the year leaking or dipping to

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six dollars forty nine cents from six seventy four Well

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those air individual price levels But what about general price

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levels Will the general price level is a measure of

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prices across an entire system not just the direction of

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a price the direction of all prices You know general

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prices Right So this week all the items in your

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grocery cart cost you twenty dollars Two cents That's your

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general price level If you want to make an economic

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indicator out of it well call it your personal general

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price indicator or PGP I once you know the general

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price level while you contract overall price changes over time

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So a year ago the four items that you buy

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every week totaled nineteen dollars Forty two cents This year

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Twenty dollars two cents Your PGP I rose three point

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one percent from last year And there's a map new

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minus old overalls that you get that percent growth formula

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thinking well In real life he's general price levels are

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used to track inflation or deflation though well it doesn't

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happen all that often deflating things People like to rattle

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off inflation stats but it's actually a tricky thing to

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really track Honestly you're fairly er accurately in a complex

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economy prices for various products are moving in different directions

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all the time and a different rates all the time

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Combining all this action into a single stat well is

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extremely complicated There are a lot of competing indicators that

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measure the general price levels in the overall economy The

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most high profile of these is the Consumer Price index

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or CP I It works like the total price is

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for your weekly grocery basket except that the CP I

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includes a big basket like a basket with a representative

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sample off of all the stuff people by at least

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all the stuff that CPS measures And it's like thousands

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of things Your personal consumer price index may include just

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those four items that you buy every week You know

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the basket where one in four of the items are

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enema tube But the C P I R consumer price

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index is a lot broader thousands of items that people

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die all the time or in that index So yeah

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enema to prices make up well hopefully far less than 00:03:13.87 --> [endTime] twenty five percent of that index What

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