Question

1.Provide an explanation for how market-compatible prices are set by producers, absent any government interference.

2.Explain why the price that one group of producers is willing to pay for any given ingredient (say, milk) becomes the price that other groups of producers (say, of cheese or yogurt) are forced to pay for that same ingredient.

3. Companies are not always successful forever, and they are forced to change. Adaptation in the market is key to longevity, but changes can happen suddenly. Discuss and provide examples of some of the changes that companies face.

4.What do “inflation” and “deflation” mean, and what economic implications do they have?

Answer 1

1) Producer decide the price of any goods and services as per their costing and profit maximization policy ,As higher price tends to reduction in demand and increase in supply where lower price tends to increase in demand and decrease in supply.

In economies, price mechanism is plays a principal role in deciding the marketing compatible prices ,which is mainly set by producer . A Price mechanism is a system where price plays a key role in directing the activities of producers , resource supplier as well as consumers.

2) As we know, Milk, cheese or Yogurt comes in the category of Substitute goods, substitute goods means alternative goods that could be made up of same thing. All of them can fulfill the desire of body so, consumer can pay the same price for any of them. Among these products elasticity of demand increase/decrease. As the price of milk will rise automatically the demand of yogurt will rice and vice a versa.

3) 3. Companies are not always successful forever, and they are forced to change. Adaptation in the market is key to longevity, but changes can happen suddenly.

Following are the strategy involved in the longevity -

a) Engage in ongoing planning with a realistic version.

b) Establishing a realistic vision of the future.

c) use disciplined approaches to developing leadership and executive skills .

d) Implementation of sound and healthy fiscal management.

e) Adapt to changing circumstances.

f) Build substance into the enterprise.

g) Control Growth.

h)Maintain motivation.

Longevity means something like durability, similarly I have discussed about the longevity of any product/ firm and given steps is part of the longevity.

4) Inflation-inflation means the rise in the price of any goods and services means decrease in the value of money over a period of time. It means sustainable decrease in the purchasing power of the money. It is charged by the central government authority, ensure the smooth running of economy.

Deflation- It is just a reciprocal of Inflation, Reduction in the money supply in the economy also decrease in the credit in the market is the key reason of deflation.It may be occur due to less demand and high supply.

Both of them create problematic economy by unintendend redistributions of purchasing power ,blurred prices signals and also in long term planning for business.