When pricing a product, a business needs to choose one that fits with the rest of the elements in the marketing mix. E.g. high price so that consumers think they may be buying high-quality goods, good deal for low-quality goods, or competitive prices in a market with a lot of competition.
People believe prices are determined by the seller of the product, but that is not quite so. Prices are driven by market forces called demand and supply. The demand isn’t only that people need it a product, but that they want it can be willing to shell out the dough. Prices can affect how much demand there is for a product. Normally, if the price up goes, demand down goes, and vice versa. Supply also varies with price. However, it differs. If the purchase price up goes, then the owners would like to be given more products to take benefit of the high price, thus the source rises (and vice versa).
For the market price to be decided, supply and demand must all be put onto the same graph. The place where both lines (called curves) cross is called the equilibrium, where in fact the same variety of goods are demanded and in supply leading to no leftovers. All of the products are demanded and all of them are sold. The graphs above assume that the demand and supply of goods are fixed. But these plain things can change, which shifts the supply or demand curve left or the right in the graph.
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Changes in the purchase price affects where you are on the curves. But changes in other factors have an effect on the positioning of the curve on the graph. The reputation of alternative products. The reputation of complementary products. Changes popular and taste. The result is: if demand falls, the marketplace price and sales will fall, and the demand curve will shift left.
If demand rises, the market price, and sales will rise, and the demand curve shall change to the right. It is illustrated on the graphs below. Elasticity of demand is how easily demand can transform when prices change. Something with an elastic demand curve would have an increased change in demand when compared to a change in cost (uses percentages). A product with an inelastic demand curve could have a lesser change in demand than a change in price.
The elasticity of demand of something is mainly suffering from how many substitute products that it has. Price of raw materials. Helps it is cheaper to create goods. Higher fees mean higher costs. Supply of crops depend on weather. The result is: if supply falls, the marketplace price will rise, sales will fall and the source curve will shift left. If supply rises, the market price shall fall, sales will rise and the supply curve will shift to the right.
It is illustrated on the graphs below. The elasticity of supply is how and quickly source can change when prices change easily. How means how quickly products can be produced and supplied quickly, which is not so quick for products created by agriculture. Something with a flexible supply curve could have an increased % change in source than a change in price. A product with an inelastic supply curve would have a lesser change in supply when compared to an apparent change in cost. If something is easily recognizable from other products, it could have a brandname name probably. And if it has one, it would need a suitable pricing technique to complement the brand name that should improve its brand image.
