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310 DF:
New Post by Lana Dye
In businesses,
companies, or organizations, product prices are determined through supply and
demand. Essentially, consumers will pay a specific price for a product
depending on its’ demand level. If this product is in high demand and everyone
is wanting it, the price is going to increase. Because of the price increase,
people will begin to buy less of this product. Moreover, you will see customers
buying more of a product if the price goes down. This is known as the
demand-based method (Warren et al., 2017). Then, there is the competition-based
method. This price is determined by other competitors. If a business owner’s
competition has reduced their prices, they must adjust their prices as well in
order to face the competition (Warren et al., 2017).
Prices are mainly determined by your supply chain. If a supplier increases
their prices, the business owner will have to increase their prices as well in
order to continue operating. For example, I have seen this first hand with my
father’s business. He owns two restaurants and because of the price inflation
in food products, he has had to increase his prices.
Determining selling prices can also be seen through methods such as
product cost, total cost, and variable cost (Warren et al., 2017). Each method
is different in that they apply to various decision and production
environments. Therefore, it depends on what type of business you are in in
which you will determine what cost-method will be used.
Reference
Warren, C. S., Reeve, J. M., & Duchac, J. (2017). Managerial
Accounting (14th Edition). Cengage Learning US. https://bookshelf.vitalsource.com/books/9781337516143
263 words
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310 DF:
New Post by Jacob Outlaw
There are different ways to
create the price of a product. The main strategies are cost-plus pricing, price
skimming, and competitive pricing. Cost-plus pricing is adding all the variable
and fixed costs together and making up a percent more to create profit. This
strategy is good for companies who have similar products and this allows the
company to understand the average profit they will make. Price skimming is
where a new product is introduced into the market and companies price it high
and let it slowly go down. This strategy allows a market value to be
established and lets the customers choose what the product is worth. (Shavandi &
Zare, 2013) Competitive pricing is where the competition for a similar product
creates the prices. This allows the company to understand what the customers
are willing to pay and takes the guesswork away. These strategies are commonly
used among companies and are effective ways to create product prices.
Resource:
Shavandi, H., & Zare, A. G. (2013). Analyzing the
price skimming strategy for new product pricing. Scientia
Iranica.Transaction E, Industrial Engineering, 20(6), 2099-2108. https://www.proquest.com/scholarly-journals/analyzing-price-skimming-strategy-new-product/docview/1509437149/se-2?accountid=11033

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