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Introduction

In more established markets Cheap NBA Basketball Jerseys , executives require stronger guidance in pricing decisions than that provided by exchange value models. They will require a clearer understanding of the customerís response to price. Through quantifying the relationship between sales volume and prices, executives can identify the profit sensitivity to price changes and optimize prices.

Does higher price mean higher profit?

Price consists of cost plus profit. If cost goes up, the price usually must go up also. But the market might not support a price increase intended to maintain the same profit per unit. Instead Cheap Basketball Jerseys , sales would fall off. In such case, the higher price would more likely be accompanied by no increase, or even a reduced supply Cheap New NBA Jerseys , including layoff of workers, rather than the opposite as portrayed on the supply curve. Businesses do not increase production when they are confronted with reduced profits, regardless of higher prices that might be posted. Increased output occurs only in anticipation of higher profit. As already noted Cheap Nike NBA Jerseys , the supply curve should be profit not price; hence the curve is incorrect. Higher prices for the products usually result in higher profit to farmers because the previous lower prices already include some profit, however small on top of costs. In any event, higher prices received for their products do give farmers an incentive to increase output. The profit increase when the market price increases.

Does lower price mean lower profit?

The profit decreases when the market price of the firm decreases. The profit can be made from the quantity of the product produced and the differences between average total cos and price at quantity. Marginal cos curves usually slope upwards Cheap NBA Jerseys Online , it means that he market price falls, the profit maximizing for the firm also decreases. It is difficult to analyze the impact of price decrease on difference between price and total cost. The quantity of a firm produced decreases, the average cost of production will increase. On the other hand Cheap NBA Jerseys Free Shipping , quantity of a firm decreases also decrease the firmís average cost of production. Because the profit effect will change when one component of profit decreases while the other component of profit increases. In this case, lower price means lower profit.

Zero - profit point

For a business firm, that level of price at which the firm breaks even Cheap NBA Jerseys From China , covering all costs but earning zero profit. Profit can be calculated when the quantity of the product produced and the difference between average cost and price. When the market price is equal to the quantity average cost produced it seems the profit is zero. The zero-point profit can be find at the price line, average cost and marginal cost curves intersection.

Conclusion

The conclusion for the above is the when the market price is above the bottom of average total cost curve then the profit is greater than zero. When the market price touches the bottom of total cost curve then the profit is zero. And when the market price is below the bottom of total cost then the profit is negative.
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Wed Jun 26, 2019 11:57 pm