Answer to Question #294707 in Marketing for Ruth

Question

Who determines price

Answer 1

The price of a product or good is primarily influenced by the law of supply and demand. Essentially, consumers have the desire and willingness to purchase a product while the manufacturer or producer has the objective of meeting this demand. The intersection of demand and supply essentially determines the price charged on a good or service. Other factors that influence the price of a product include the production costs, the utility of the demand, and the level of competition in the market. When it comes to the production cost, the manufacturer or producer decides how to price their products based on the resources used in the production of the good (Antràs & Staiger, 2012). In this case, if it was expensive to produce the good or service, then it inherently becomes expensive in the market with the producer wanting to make a profit or generate revenues. When it comes to the utility and demand of the product, it is essential to understand that a customer is ready to pay up to the point where they consider the utility of the product to be equal to the price demanded. To regulate prices in the market, the government has established a clear set of rules and regulations that prevent producers and manufacturers from extorting and oppressing the consumers.

References

Antràs, P., & Staiger, R. W. (2012). Trade agreements and the nature of price determination. American Economic Review, 102(3), 470-76.