Give a response to each discussion post
response 1
One factor a firm should consider when deciding to raise or lower its prices is its effect on the market. While reading the text I learned that each market is based on a supply and demand model that is on an axis comprised of price and quantity. Since the demand curve depicts the number of total consumers that are willing to buy the product at a certain price, and the demand curve intersects the supply curve which is the number of producers who are willing to sell at each price if the prices are raised or lowered the equilibrium will change. Moreover, firms should be careful on how they change their prices for this could cause a change in how the consumers behave and how the firm operates. For example, if a firm were to raise its price, even though the firms will be more willing to produce and sell more units, consumers might not respond positively if prices are too high. On the contrary, if a firm were to lower their prices, even though consumers might respond positively and are more willing to buy, this could lead to the firm not being able to cover their costs and they could refrain from entering production (Brickely, Smith, Zimmerman, 2016).
According to the International Monetary Fund, changing prices is not something that firms can control because of inflation. Inflation is the rate of increase in prices over a given time. This means as a certain cost of production increases for a firm, sometimes they are forced to increase the product of services to balance it out. In addition, the firm must consider the elasticity of demand for the product. If the demand is elastic enough then lowering the price of the product will increase revenue, and if demand is inelastic then raising the price of the product will also increase revenue. Other factors a firm should consider are government regulations like price ceiling or flooring. This is something to take into account because passing these limits is illegal and could lead to fines. Another factor firms should consider is pricing wars. If one firm changes its prices, then other businesses in the industry will follow. This could be an issue when companies are lowering the prices to beat the others. If companies in the industry continue to lower their prices this could diminish their market (Oner).
response 2
The complete comprehension of product demand is critical for many managerial decisions (Brickley et al., 2016). When firms decide whether to raise or lower their prices, it is numerous vital factors. Those factors include the offering’s cost, demand, the customer who needs it is designed to meet, the external environment. Such as the competition, the economy, government regulations, and other aspects within the marketing mix include the nature of the offering, the current stage of its product life cycle, and its promotion and distribution (Libraries, 2015). Therefore by a company having a complete understanding of the customer demand for their products, they will know the ability to estimate the business potential. Understanding the law of demand, the elasticity of demand, and the linear demand curves will help a firm consider whether they are making the best decision to raise or lower its prices. Elasticity means that there is a substantial change in quantity demanded when another economic factor changes in goods and services.
I see the decision to raise and lower prices can make or break a firm. By letting your customers know in advance, they can prepare themselves for such changes. For example, companies such as Netflix, Hulu, and even your phone companies sent out letters or emails letting their loyal customers know of the changes to raise the prices and when it will take effect. The demand for these services is higher, which has resulted in the price rising for these goods and services. Authenticity and honesty matter to customers, especially for bad news (Dholakia, 2021).
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APA
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