How does the seller/supplier determine how much to charge for a product? What must he or...

How does the seller/supplier determine how much to charge for a product? What must he or she take into account?

Important: the question is part of an assignment about the Law of Supply in economics

Expert Solution

In order to determine how much the seller has to charge for the product it is important for him to understand

(a) competitiveness of the industry in which he is working and if it is a perfectly competitive market he has to charge the market price and if it is a Monopoly he can charge the profit-maximizing price where the marginal revenue = marginal cost

(b) the elasticity of demand for the product where if it is inelastic he can increase the price and if it is elastic he can decrease the price to maximize revenue

(c) the demand conditions and the law of supply where is the demand is very high in charge high price where is the price is higher than the quantity supplied would be high so that the demand is met on the whole.

(d) input costs of the production also determines what's the cost of the product should be

Rahul Sunny answered 2 years ago

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