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Article Anaysis

Essay by   •  July 31, 2010  •  1,091 Words (5 Pages)  •  1,588 Views

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Proper Pricing is an article that reviews "the difference the right pricing strategy can make (Baraker, 2007)." The strategies and decisions of two manufacturers relevant to pricing are important to the bottom line. To identify trends in consumption patterns and the significance of supply and demand, an analysis of the pricing of the two companies is necessary. Moreover, a study of the principles of economics is fundamental to understanding the trends in consumption patterns. In this paper, definitions of specific terms: economics, microeconomics, law of supply, and law of demand are the topics. In addition, a review of the article "Proper Pricing" (Baraker, 2007) will describe the events leading to change in the demand for or the supply of the products.

Economics

According to the "Definitions of Economics" by Robert Schenk, "Economics is the study or social science that observes how people use or organize resources to try and satisfy their unlimited wants (pp. 7, Schenk, R, 2010)." Yet another definition by David Colander states "Economics is the study of how people coordinate their desires and wants, acknowledging the social customs, decision making process and political realities of society (Colander, 2008)." The definitions are similar but Colander actually refers to the factors that are solved for people as they try to coordinate their desires and wants. Economics deals with the issues of producing goods and services, from what to produce to the amount. Another factor is to whom to manufacture the products (Colander, 2008).

Microeconomics

Microeconomics analyzes the behavior of individual choice and the influences that economics forces have on individuals' choices. Microeconomics includes certain studies on pricing policies and the effect on purchasing decisions. In addition, Microeconomics also studies

how markets allocate resources when there are mutually exclusive possibilities in relation to the markets behavior (Colander, 2008).

The Law of Demand

People who demand products or services are willing to pay the price. A fundamental concept in patterns of consumption is the law of demand. Economics refers to demand as the quantity of goods that buyer's desire and price is an important factor. In general quantity varies in opposite when prices go up (Colander, 2008). Basically this means a scarcity of products can drive the prices up. When prices go up, the resulting action is an influence on consumers; therefore, the market limits the quantity people demand. The Law of Demand states the higher the price of products the less people will demand that product or the lower the price stimulates demand. All things being constant is a part of the law of demand and refers to things that remain the same (Colander, 2008).

The Law of Supply

The law of supply is a likeness to the law of demand. The law of supply refers to quantity - "Quantity supplied rises as price rises, other things constant. Or alternatively: Quantity supplied falls as price falls, other things constant (Colander, 2008, p 88)." The premise of the law of supply corresponds to a company's ability to substitute one product for another. The point to the law of supply relates to substituting a product due to market demands with the expectation for making a profit. Economic factors can create opportunities cost for companies as cost for goods and services rise. Manufactures will substitute a product or increase supplies on a product that has risen in price. This is done to maximize profits by the supplier (Colander, 2008).

Economists analyze the factors that shift demand and supply. Aside from price, other factors have an effect on the demand of goods. Several fundamental effects on demand include tastes, expectations, society's income, taxes, and the price of other goods (Colander, 2008). For sure, people have different taste. Also people's taste can also change with age. Expectations from people for any number of things can affect demand. As well as higher taxes can reduce consumer spending and reduce demand for goods. Price for related goods can affect how people spend their money. Price is an incentive

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