Tiêu đề Unit 5 - Product Pricing - Applied Economics.pdf ✅

www.ckundan.com.np 2 of factors that affect the marketing environment. Every organization sets the prices of its products for fulfilling various objectives. Pricing Objectives: 1. Profit-Oriented Objectives: Include the following objectives: a. Maximizing Profit: Implies that prices are set in such a way that they help in achieving maximum profit. According to Stanton, Etzel and Walker, “The pricing objective of making as much money as possible is probably followed more than any other goal.” Profit maximization is more beneficial in the long run as compared to the short run. For instance, an organization selling a new product tries to build a customer base by selling the product at low prices in the short run. This helps the organization to gain profit in the long run by winning loyal customers. b. Achieving a Target Return: Refers to earn an adequate rate of return on the investment done by an organization in manufacturing a product. The main focus of marketers is on maintaining a specific return on sales or investment. This is done by adding extra cost to the product for earning a desired profit. 2. Sales-Oriented Objectives: Include the following objectives:

www.ckundan.com.np 4 Concept of Market Equilibrium: Market equilibrium is an economic state when the demand and supply curves intersect and suppliers produce the exact amount of goods and services consumers are willing and able to consume. Essentially, this is the point where the quantity demanded and quantity supplied is equal at a given time and price. There is no surplus or shortage in this situation and the market would be considered stable. In other words, consumers are willing and able to purchase all of the products that suppliers are willing and able to produce. Everyone wins. If the market price is above the equilibrium value, there is an excess supply in the market (a surplus), which means there is more supply than demand. In this situation, sellers will tend to reduce the price of their good or service to clear their inventories. They probably will also slow down their production or stop ordering new inventory. The lower price entices more people to buy, which will reduce the supply further. This process will result in demand increasing and supply decreasing until the market price equals the equilibrium price. If the market price is below the equilibrium value, then there is excess in demand (supply shortage). In this case, buyers will bid up to the price of the good or service in order to obtain the good or service in short supply. As the price goes up, some buyers will quit trying because they don't want to, or can't, pay the higher price. Additionally, sellers, more than happy to see the demand, will start to supply more of it. Eventually, the upward pressure on price and supply will stabilize at market equilibrium. Concept of Firm’s Equilibrium: A firm is in equilibrium when it has no tendency to change its level of output. It needs neither expansion nor contraction. It wants to earn maximum profits. In the words of A.W.