Discuss the main factors affecting product pricing in the UK
Price – the amount of money which costumer pays for product or service to in order to achieve them, or the sum of values that one party exchanges with another to have or use products or services. The main factors which determine price are demand and supply. Demand is a desire of customers to own and the ability to pay for products or use services. Supply is quantity of products or services which are available to sell at the given time and price. It the most of cases price (P) determinates by the intersection of demand (D) and supply (S). It is obvious that price depends on firms objectives. The firms which main objective is to earn maximum profit will try to sell produced products at the maximum price. However there are firms which main objective is not profit maximizing. The objective of these firms might be increasing market share or surviving in the market, in this case price of products would be specific and not overstated. Also price depends on the competitiveness of the market.
In perfectly competitive market i.e. the participants are not big enough to have a market power and con not influence the price. Basically, all participants of market are “price takers”. However, when market is dominated by small number of sellers, which called oligopolists, in this case prices in the market could be determinate by the cartel. Cartel is a agreement of most powerful players in the market to restrict production of the goods and services or to keep high prices for them. Also like monopoly, oligopoly might lead to production where the marginal cost equal to marginal revenue. Monopolists and oligopolists are “price makers” rather than “price takers”. Furthermore, the cost of production affects price of the product. There are firms use cost-plus strategies to estimate final price and many of them includes additional percentage to make profit. Also it is a way to calculate the profit they will make, but...
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