Assignment 3 - Long Term Investment Decisions

1623 Words Nov 29th, 2014 7 Pages
Assignment 3: Long-Term Investment Decisions-Low Calorie Microwavable Food Company

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Outline of plan for pricing strategies to reduce products price elasticity

Low calorie Microwavable Food Company should consider the following pricing strategies to reduce price elasticity to achieve maximum profits.

1. Branding: This strategy involves creating a unique product identity, which customers can easily relate with and attach high quality. Branding is the process of creating an image or idea of a product or service in the market arena, which increases the demand for such product. It may include changing the packaging, creating brand names and improving
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This is important as it allows the company to attract mass customers at a given period, which improves its revenues.

4. Price introductory strategy: This strategy calls for an organization to set the prices of its products at a high price during the introduction of the product in the market. In a market economy, some customers are willing to pay more for new products, while others are not. The organization therefore targets the high spending customer, but with time as it reduces the prices, the organization caters for the low expenditure customer.

Major effects that government policies have on production and employment

Government policies positively or negatively affect the production and employment in the market economy. The following discussion highlights various policy actions by government, which results to different effects on the production and employment.

1. Taxation and demand: When the government changes the rates of direct and indirect taxes, it affects the demand for the products or services that the changes affect. For instance, by increasing value duty of alcohol, the government effectively causes substitution effect, which reduces the demand for alcohol, and thus reduces the level of its production (Abel and Bernanke, 2001). On the other hand, government subsidies to producers reduce the production costs, which lower the market prices of the commodities