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The pricing of goods is largely determined by the presence or absence of competition. Though Cartels will diminish the competition.
In general producers can be grouped as price-takers or price-makers. De Beers for example, who essentially control the supply of diamonds to the market, use marketing to set a high value on the product, and thus enhance the value of their product. For gemstones have little real value, other than that given by vanity. So they are price-makers.
Industrial diamonds on the other hand are raw material essential to industrial manufacturing, but there are some competitors for these processes. Boron nitride (BN) for example may be of similar hardness to diamond, but has a higher working temperature limit. [Curiously, like carbon, BN can be formed at will as a soft lubricant similar to graphite, or as a hard material similar to diamond. One form may be harder than diamond.]
So for some uses, the price should not be set too high, for that would encourage the production of substitutes, for which economies of scale may eventually disadvantage diamond.
This is an exotic example of price setting, but illustrates the mechanisms.
Price-takers, are usually producers of commodity goods such as potatoes or rice, and there are plenty of competitive producers. In this case, the market price is set by the buyers who are only prepared to pay a certain price. And even that price is subject to competition from substitute products.
In any market, life is more pleasant when producing and selling high quality products, not commodity products.
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How does a price driven economy allow for a wide diversity of goods?
It attracks new firms to the market
How does a price- driven economy allow for a wide diversity of goods?
It attracks new firms to the market
What is monopolist's marginal revenues less than the price of its goods?
because the monopolist firms are price maker and they can set any price they want and the customers are not perfect knowleged
What are the rules of households and firms in a market economy?
In a market economy, firms make the goods. Households buy the goods.
What is markets in which firms sell their output of goods and services?
The product market is the market in which firms sell their output of goods and services.
How does a price driven economy allow for a wide diversity of goods?
It attracks new firms to the market
How does a price- driven economy allow for a wide diversity of goods?
It attracks new firms to the market
What is monopolist's marginal revenues less than the price of its goods?
because the monopolist firms are price maker and they can set any price they want and the customers are not perfect knowleged
What are the roles of households and firms in the market economy?
in a market economy, firms make the goods. Households buy the goods
What are the roles of household and firms a market economy?
in a market economy, firms make the goods. Households buy the goods
What are the rules of households and firms in a market economy?
In a market economy, firms make the goods. Households buy the goods.
What is markets in which firms sell their output of goods and services?
The product market is the market in which firms sell their output of goods and services.
Households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the .?
product market
Households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the?
product market
Households pay firms for goods and services Firms supply households with goods and services the purchase and supply of goods and services takes place in the?
It's Product Market.
Is there any disadvantage to a government subsidizing domestic firms to make them able to complete in price with cheaper imported goods?
Some positive elements are that it helps domestic consumers, firms and, workers. However, it could lead to inflation or an overall increase in price of products across all sectors. People may also end up paying higher taxes on goods.
What are the roles of household and firm in a market economy?
Consider an economy consisting of households and firms which interact in two markets i.e. the goods and services market in which firms sell and households buy; and the labor market in which households sell labor to business firms or other employees. Required: Illustrate the above economy on a diagram
