How Is Price Determined In Each Market Structure In Terms Of Maximizing Profits?


1 Answers

Connor Sephton Profile
Connor Sephton answered
Price in any market structure is always determined by what the market will bear. In other words, a vendor or company cannot charge more than other people want to pay. Pricing will therefore always be adjusted to reflect the reality of the marketplace.

One shining example of the market self-adjusting would be, where items are placed at auction before millions of shoppers; these online auctions are excellent indicators of the true value of an item or service. In most cases, the final sale price of an eBay sold item will be a very good indicator of its ideal price. There will always be exceptions, but, in general, the people in the marketplace will decide the price, even though the company put the sticker or price tag on the item.

Businesspeople that are in denial about the realities of how their inventory will fetch on the open market often must lower prices later on, as reality sets in. Business is about making money, and this is only possible when a product or service is priced to sell.

Pricing Tips For The Marketplace

• Market research is the key to effective pricing that attracts customers, rather than repelling them. People will have a sixth sense when they are being overcharged or ripped off for an item; they will go elsewhere if they find a price too high.

• To get a sense of what proper pricing is, it's important to research competitors, check online pricing structures for similar products, and generally build a composite of pricing information for a particular line of business. Then, setting a price will be based on the logical realities of the marketplace, rather than guesses or inflated ideas of what a product or service is worth.

Pricing is a vital part of a successful business model, the more an entrepreneur knows about pricing the more likely he or she is to succeed at their business venture.

Answer Question