Understanding Pricing, Costs, And Profits For Industries Essay

1470 Words Jul 23rd, 2015 6 Pages
In understanding pricing, costs, and profits for industries, one must understanding the following areas: demand curve, marginal analysis, stay-even analysis, marginal cost, economies of scale, learning curve, economies of scope, shift in demand, shift in supply, market equilibrium, and strategies for keeping profit from eroding. These are the critical function that every organization or industrial business needs to be successful. The upper management team needs to know and understand that concept of economics in order to make the best decision for the industry or the organization.
The demand curve represents how much consumers will purchase at a given price. Economists use jargon describing the response such as “price decreases then quantity is demanded to increase” (Froeb, McCann, Shor, & Ward, (2015); p. 69). The demand curve can be use for an individual or a market. “Demand curves for different individuals or areas or time periods can be aggregated into demand curves that cover a wider range of potential customers or a broader geographic area” (Ulbrich & Warner, 1990; p. 26).
In marginal analysis of pricing, the demand curve represents a seller with a dilemma. The sellers have the ability to raise prices which will sell fewer units, but would earn more on each unit sold. The industry using marginal analysis must use the formula of MR > MC (reduce price to sell more) or MR < MC (increase price to sell less) as guidelines to try and keep an equilibrium in the…

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