Prices as a Set to Satisfy Demand - Essay Example

Prices are usually set whilst taking into consideration the consumers’ ability to buy the products. This helps the company understand its basis in line with the sale of the products. Prices are usually set with respect to the industry’s prevalent criteria and this generally gives a better comprehension of the way the consumers would be able to purchase the products off the shelves.

A firm would eventually lower its prices when it feels that the competitive activity has started to make its mark within the relevant industry and when the customers are easily switching over to cheaper priced goods. The value of pricing wars is significant since economic recessions hit any market in a specific period of time and thus take the bulk of the customers away with it. (Newman, 2006)  A firm would ultimately resort to lower price levels as the competition gets heated up and when the rivalry amongst competitors is of immense importance for the overall well-being of the major players involved within the trade industry.

Price is a major determinant of a firm and lowering it would mean that it has accepted the strengths of the competitive rivalry and thus economic rundowns are a major given under such settings. (Decoy) Pricing is difficult to set internationally because there are different pricing indices all over the world. More than that, there are different currencies which are existent in various nations of the world. Apart from this perspective, there is the understanding which discusses each pricing index to be seen in the light of several mannerisms in which pricing is levied on the said products.

This could include the off-the-rack pricing which means the product is sold at a price that is balanced with similar products, or it is skimmed high so that prestige issue arises from the equation. At times, the product is priced with respect to penetration levels, which keeps its price low when we compare it with similar products. However, on all fronts, pricing in a global concern requires a single currency to be had in the first place and more than that, economies need to be of a similar level to make the pricing uniform the world over.