Question

You are a business consultant in a remote and isolated small town. Two customers, a dentist and a portrait artist, came to you to ask for advice. They are considering to raise the price of their service to increase revenue. Write a short report for each of them using your economic training. How would your report be different if all these happened in the context of a great metropolitan area?

Answer 1

Ans

The cost of an item is straightforwardly identified with the interest for the equivalent, the general market size and the level of rivalry in the market. This is otherwise called versatility of interest, which alludes to the level of progress in the amount requested as an impression of the cost being charged for the equivalent.

A doctor's administrations require long stretches of training and there are moderately fewer dental specialists, uniquely wherein the town is littler. It gives a bit of leeway to the doctor to have the option to raise the costs of the administrations being offered singularly as individuals looking for these administrations would be left with no other option in the commercial center. The current commercial center administrators, for example Wother doctors would likewise look for the chance to work at more significant levels assuming any. This would make it feasible for them to have the option to win equivalent to their opposition.

Despite what might be expected, the aptitudes of a picture craftsman are generally simpler to adjust to and these administrations are picked by just chose individuals. The interest for this isn't important and raising the costs would directly affect the quantity of individuals deciding on this administration at a given timeframe. Subsequently, it isn't suggested and could bring about a critical loss of benefit whenever done past a point.

In a Metropolitan territory, the interest for administrations is high, and the two gatherings can pick up from volume of deals. Since the rivals in the commercial center likewise are high, the motivating force to expand the costs would stay low. The interest would fall if we somehow happened to build the costs. In such markets it is imperative to be acceptors of cost for both these administrations and the present market costs are altogether that these individuals may charge in this industry.

Answer 2

The dentist in an isolated small town would be adviced to increase prices for his services. This is because dental services are an essential service and people cannot avoid going to the dentist. But the price rise would only be possible if there are no other dentists in the town. When there are other dentists in the town, then an increase in prices will make the people switch to the other dentists. If he is the only dentist, then he should increase prices to earn more profits. The dentist services in such a situation would be similar to a monopoly.

On the other hand the services provided by potrait artist are not essential. Only those who have a taste for the paintings would purchase the paintings at a high price. This would mean that an increase in the price of paintings might dicourage prospective buyers. This is why the potrait artist would not be advised to increase prices.

However, if the dentist and the artist were in a metropolitan area, it would not be profitable for either of them to increase the prices of their services. This is because if they increase prices, then customers would switch to other dentists or artists because a metropolitan area would have many people who are qualified to provide these services.