ROLL NO: B43 Sec :-sm1001
2. Review of literature
3. Administered price and consumer behaviour.
4. Open market price and consumer behaviour.
5. Alternative price mechanism and consumer behaviour. 6. Objectives of study
Price set by the management of a firm, and not arrived at through negotiations between a buyer and a seller. Most retail and industrial prices are administered prices, which are then adjusted in response to the competitors' prices. Administered pricing is also referred to as rigid pricing.or inflexible pricing refers to the setting up of prices by public or private entity and not by market forces.Price set by the management of a firm, and not arrived at through negotiations between a buyer and a seller. Most retail and industrial prices are administered prices, which are then adjusted in response to the competitors' prices.
OPEN MARKET PRICES
A market which is widely accessible to all investors or consumers. In open market prices,prices of goods and services are determined by the forces of demand and supply and not by manipulation by cartels or government policies. For example in an open market for wheat and barley, multiple entities would have the ability to buy grain from western farmers in a competitive environment. These buyers would likely comprise current grain handling firms and could expand to include new entrants as well. These companies would extend their existing logistics and merchandising efforts from current non-board crops to include export and human consumption of wheat, durum and barley. Under an open market scenario, farmers will market wheat, durum and barley and have The same pricing and delivery alternatives as they do now with non-board crops. Buyers would utilize similar purchase practices, including spot and forward-price contracts to source wheat, durum and barley.
In an open market, rail transportation for all grain and oilseeds crops would be arranged on a similar basis as the current arrangements for non-board crops. Direct commercial agreements between shippers and railways, including advance booking of freight requirements, would be used to determine the allocation of rail capacity.
How does the price mechanism operate in a free market
In a free market, price is set to meet the demand which will result in the maximum amount of revenue. Price is relative, it is not a fixed thing. A companies ability to set price is based on many things, customer demand, availability of the product, the uniqueness of the product, the perceived quality of the product, how hard is the product to duplicate, control of raw materials, customer education of your product, etc. If your product is a monopoly then pricing power rests with the producer, if the product is a commodity then pricing power rests with the consumer. I'm not sure what you mean by "how do they allocate resources", but no the consumer does not make all the decisions. There are many pricing strategies to capture excess demand such as buying in bulk and getting a price break, paying a membership fee and then paying a reduced rate for product, graduated pricing based on how much you buy to name a fees and combinations of the two. Without a price mechanism, socialism lacks the means to relate consumer satisfaction to economic activity, it is argued. The incentive function of...