Question

A consistent market equilibrium price exists? if not, if there is a significant range relative to the average, why do you think that is? was there a greater or lesser relative range online than in actual stores? if so, why?

what is the ratio of the range over the average price?

please give some examples and explain reasons

Answer 1

Market equilibrium price is not consistent because there are always shocks that affect the demand and supply conditions. Suppose that the market for oranges is in equilibrium and then there is a sudden unfavourable change in the climate. This will reduce the supply and change the equilibrium in the market. There can be increase in income of the consumer or change in taste and preferences which indicate that the market does not remain at equilibrium all the time.

There is definitely arrange over which the price of a product can vary. This price definitely depends upon the type of market structure that the product is sold in. When there is a perfect competition there is no range of price but a single price that is charged by every firm. For an oligopoly market there can be a range of prices because each firm has a significant market share so it charges a price that is not equal to the price charged by other firms.

In physical stores the price variation is more than online sales. This is because consumers usually compare a website with another website only with regards to the price because they cannot see any other attributes which become visible when they enter a physical Store. The decoration interior designing music lighting and other effects encourage consumers to buy from a particular restore even if its prices are higher relatively.

This indicates that actually stores have a greater relative range. This can be seen from the sales of various online websites such as Amazon eBay and others. There is no particular ratio but prices can vary in actual stores from 10 to 20% while in online stores the variation is restricted to less than 5%.