business

Classified in Economy

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Factors affecting supply

-Costs in supplying goods to the market:Price of raw materials//Wage rates./-Improvements in Technology:Makes it cheaper to produce goods./-Taxes and subsidies:Higher Taxes mean higher costs./-Climate (for agricultural products):Supply of Crops depend on weather.

The result is: if supply falls, The market price will risesales will fall and The supply curve will shift to the left. If supply rises, The market price will fallsaleswill rise and The supply curve will shift to the right. It is illustrated on the Graphs below. 
Elasticity of supply
Elasticity of supply is how easily and quickly supply Can change when prices change. How quickly means How quickly products can be produced and supplied, which is not very quick for Products made by agriculture. A product with an elastic supply curve would Have a higher % change in supply than a change in Price. A product with an inelastic supply curve would have A lower change in supply than a change in price
Pricing strategies
If a product is easily recognizable from other products, It would probably have abrand name. And if it has one, it would need a Suitable pricing strategy tocomplement the brand Name that should improve its brand image. Here are the Strategies that are used:
Cost-plus pricing
Cost-plus pricing involves covering all Costs and adding a percentage mark-up for profit.

Easy to apply./- You lose sales if your price is higher than Your competitors price.

Penetration pricing
Penetration pricing is used to enter a new Market. It should be lower than competitors' prices.

+ Ensures that sales are made when A product enters a market./- Prices will be low. Sales revenue will be low.

Pricing skimming
High prices are used when a new product is Introduced into a market, partly because it has a novelty factor, And because of the high development costs. High prices could be Charged because a product is high quality. One last use of it is toimprove the brand Image of a product, since people usually associate high price with Good products.

+ Skimming can help establish a Product as being good quality. /- It may lose Potential customers because of high price.

Competitive pricing
Competitive pricing means setting your price to A similar or lower level than yourcompetitors Prices.

+ Sales will be high because your price is at a realistic Level (not under/over-priced)./- You have to research on Your competitors prices which costs time and money.

Promotional pricing
Promotional pricing means that you lower the Prices of goods for a short time.

+ Help get rid of unwanted stock/+ Can renew interest in a product/- Sales revenue will be lower.

Psychological pricing
Psychological pricing involves setting the price That changes consumers perception of a product. This may be By:

-Using high price to make using the product give The user a status symbol./-Pricing a product at Just below a whole number which gives it an impression that It is cheaper./-Supermarkets charge low Prices for products that are bought on a daily basis to give Consumers an impression that they are being given good Value for money.

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