A firm with market power can change the volume of its sales by changing the price. Every firm faces a demand curve for its product. The firm's demand curve is different to the industry demand curve which is the total amount demanded from all firms at a particular price. A firm in a competitive industry faces a flat demand curve for its product (even though the industry demand curve is downward sloping). A firm in a competitive industry is a price taker because it cannot raise the price of its output above the market price without the e demand for its output falling to zero. Commodity producers, like wheat growers, are the purest example of price takers - firms that have no control of the price at which there product is sold and consequently have no market power.

A firm with market power faces a downward sloping demand curve for its output. A price cut will increase demand for its output and likewise a price increase will decrease it. A firm with market power is a price seeker. The firm sets (seeks for) the price that maximizes profits (or more precisely maximizes the value of the firm).