Concept Of Microeconomic Helps In Pricing The Product
SECTION - C
Concept Of Microeconomic Helps
In Pricing The Product
What is Microeconomics
Micro means small. Thus, micro economics analyses
individualistic behaviour. It studies an individual
consumer, producer, price of a particular
commodity, household, etc.
According to Prof. K. E. Boulding, "Micro
Economics is the study of particular firm, particular
household, individual prices, wages, incomes,
individual industries and particular commodities."
What Is Price?
price is the quantity of payment or compensation
given by one party to another in return for goods or
Economists sometimes define price more generally
as the ratio of the quantities of goods that are
exchanged for each other.
Pricing strategies for products or Service encompass three
main ways to improve profits. These are that the business owner
can cut costs or sell more, or find more profit with a better
It is the simplest pricing method. The firm calculates the cost of
producing the product and adds on a percentage (profit) to that price to
give the selling price.
Creaming or skimming
In most skimming, goods are sold at higher prices so that fewer sales
are needed to break even. Selling a product at a high price, sacrificing
high sales to gain a high profit is therefore "skimming" the market.
Setting a price based upon analysis and research compiled
from the target market. This means that marketers will set
prices depending on the results from the research.
Setting the price low in order to attract customers and gain market
share. The price will be raised later once this market share is gained.
Premium pricing is the practice of keeping the price of a product or
service artificially high in order to encourage favorable perceptions
among buyers, based solely on the price.
Demand & Supply
Supply and demand is an economic model of price determination in a
market. It concludes that in a competetive market, the unit price for a
particular good will vary until it settles at a point where the quantity
demanded by consumers (at current price) will equal the quantity
supplied by producers (at current price), resulting in an economic
equilibrium of price and quantity.
When Demand Increase Or Decrease And Supply
An increase in demand while holding supply constant will cause a price
A decrease in demand while holding supply constant will cause a price
In this case, the increase in demand caused price to rise from P1 to P2.
When Supply Increase Or Decrease And Demand
An increase in supply while holding demand constant will cause a price
A decrease in supply while holding demand constant will cause a price
In this case, the increase in supply caused the price to fall from P1 to
Factor Pricing In Compitetive Market
Monopolistic Competitive Market
There are many producers and many consumers in the market, and no
business has total control over the market price.
Consumers perceive that there are non-price differences among the
There are few barriers to entry and exit.
Producers have a degree of control over price.
Oligopoly Competitive Market
In this competitive Market firm are price setter rather than price
Barrier to entry in this firm is high
Oligopolies can retain long run abnormal profits. High barriers of
entry prevent sideline firms from entering market to capture excess
Oligopolies tend to compete on terms other than price. Loyalty
schemes, advertisement, and product differentiation are all examples
of non-price competition
Product – Cloth
During Durgapuja and Diwali time and marriage ceremony,
demand is more than supply so high price is charge for cloth
During other than this session, the demand is less than supply so
less price is charge by allowing discount in the price of the cloth
In monopolistic competitive market, the firm can’t charge high
price but little more than competitors price because of brand
In oligopoly competitive market, due to less seller and more
buyer, the firm set the price of in own choice but up to certain
limit because high price is result to loose the customer