COMMERCE 2AB3 Chapter Notes - Chapter 9: Market Power, Effective Demand, Commodity Market
12 Feb 2020
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Product price should cover costs and earn a reasonable profit. Must have a good understanding of market forces for appropriate price. A company (price taker) must accept the price as set by the competitive market (supply and demand) Market sets price when product cannot be easily differentiated from competing products commodity markets . A company can set the price when. Company can differentiate its product from others. When few or no other producers can manufacture a similar item. (patent or copyright) It is successful at distinguishing its product or service from others. In a highly competitive market, price is largely determined by supply and demand. Must control costs to earn a profit. Target cost-plus pricing when a company sets a product price, it does so as a function of, or relative to, the cost of the product or service. May have to set own price where there is little or no competition. Price typically a function of product cost.
