Individual financial gain determines the price for oligopolies. These firms find non price competition to keep from having to change the price of their products. The output of each product must be maximized to see a true profit which is
So to be able to have a productive and successful business, business owners may want to look into maximizing their profits by way of the profit maximization concept. Profit maximization is when a company comes to a conclusion on the price and output level that will turn the maximum profit by using this particular process (Wikipedia). Granted there are many different approaches to this problem; however in this essay we will be considering the TR to TC method and the MR MC method. Tiffany C Wright expressed that the total revenue to total cost method is dependent on the fact that profit equals revenue minus cost. Total revenue equals price time’s quantity.
Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
Profit maximisation is assumed to be the objective of a firm, however there are other objectives that firms have, these include: revenue maximisation and sales maximisation. A firm aiming to maximise profit will aim to operate at output level Q, where Marginal Revenue (MR) is equal to Marginal Cost (MC). A process that companies undergo to determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, sale prices, and output levels as a way of reaching its profit goal. There are two main profit maximization methods used, and they are Marginal Cost-Marginal Revenue Method and Total Cost-Total Revenue Method.
The strongest competitive advantage is a strategy that that cannot be imitated by other companies. Competitive advantage can be also viewed as any activity that creates superior value above its rivals. A company wants the gap between perceived value and cost of the product to be greater than the competition. Michael Porter defines three generic strategies that firm's may use to gain competitive advantage: cost leadership, differentiation, and focus. A firm utilizing a cost leadership strategy seeks to be the low-cost producer relative to its competitors.
Piyatida Choomchaiyo Business HL Ms. Brennan 12/02/11 Case Study – Bodyline a) Supply and demand is one of the most fundamental concepts of economics that is also very useful to pricing in business. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product that people are willing to buy at a certain price. Supply represents how much the market can offer (price). The correlation between price and how much good/service is supplied to the market is known as supply relationship.
• A differentiator gains a competitive advantage because it has the ability to satisfy customers’ needs in a way that its competitors cannot, which allows it to charge a premium price for its product. • Premium prices → increased revenue → superior profitability • A differentiator invests its resources to gain a competitive advantage from superior innovation, excellent quality, and responsiveness to customer needs • A product’s appeal to customers’ psychological desires is a source of differentiation. ▫ Example? 13 Differentiation • Generally, a differentiator chooses to divide its market into many segments and offer different products in each segment • A differentiated company concentrates on developing distinctive competencies in the functions that provide competitive advantage ▫ These are still expensive! • A differentiator must control its cost structure to ensure the price of its products does not exceed the price customers are willing to pay for them • When differentiation stems from the design or physical features of the product, differentiators are at great risk of being imitated ▫ Example?
The price of all goods and services depends largely on supply and demand. Individualism and competition are essential to capitalism. Individual success is valued and people are encouraged to pursue personal wealth, often through higher education or by starting a business. Competition is also stressed as a way of increasing personal success and wealth. Capitalism relies on competition for resources and a system of checks and balances.
However using the curve we have to set a fair price to get rid of a lot of accounts at time and sell them in bulk. Setting a fair price helps the flow of the debt to come in out and keeps the demand and supply at an equal level. Microeconomics creates models that are effective when looking at the markets supply and demand for certain products it relies a high degree of competition which means there are enough buyers and sellers for bidding to take place which raises and lowers prices. The equilibrium is the point of which all bidding has been done and no one at this point will go higher or lower. With this said in the simulation the elasticity is the quantity how many apartments were vacant and how the demand of these apartments were not being met because of the price.
Keeping in mind the customer buying criteria, how would you increase margins for a low end product? How would you increase margins for a high end product? To increase margins for a low end product you would have to lower the price, for a high end product labor costs would need to be