What shape does the demand curve take in a price taker market?

In a price taker market, the demand curve is represented by a horizontal line. This indicates that individual firms are unable to influence the market price of their product, as they are small relative to the overall market and must accept the prevailing market price.

In this type of market, any attempt to raise prices above the market level would result in a complete loss of sales, as buyers can easily turn to other suppliers who are offering the same product at the market price. Conversely, firms can sell any quantity of their product at the market price without affecting the price itself, leading to a perfectly elastic demand curve for an individual firm.

This characteristic highlights the distinction between a competitive market structure and monopolistic or oligopolistic structures, where firms may have some degree of pricing power. Understanding this concept is crucial for analyzing firm behavior and strategies in different market environments.