Economics for Managers
Instructions
How do firms set prices?
Answer
Economics for ManagersIntroductionCompanies are often guided by the need to make profits. Firstly, they aim to ensure that they break-even in the specific undertakings they are involved with. Therefore, they consider the amount of money they have put into the production process. Further, they establish the amount of revenue they need, based on the production which they have. The indices, therefore, guide them appropriately on the pricing to allocate on their products (Kim, & Sim, 2015, p.39) Eventually, they establish a sales margin which guide them on how much they need to put on their products to realize their intended profits. However, the method of affixing prices on their products is not often as direct, there are various methodologies and considerations they make to establish the...
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