Identify and Explain the Main Economic Factors That Determine the Price of a Good or Service

-The role and significance of prices in the market economy has to do with supply and demand. If there are the same amount of buyers as products, the price will settle. If there are more buyers than products, the price of the product will rise. And, if there are more products than buyers, the price of the product will decrease. This occurs until the supply of the product matches the demand of the product.

Have you ever wondered how the goods and services you purchase become available to you, and have you ever wondered how the prices are determined? Even though economics involves many concepts, supply and demand, as well as trade, are among the most important forces in an economy because of their effect on prices, consumer behavior and economic growth.

The sale and production of a commodity depends on numerous factors and market forces. Mainly, demand and supply of that particular commodity or good. The demand and supply of the commodity in turn depends on income of the consumers, price of substitute goods, price of complementary goods, change in consumer’s taste, costs of production, increase or decrease in various taxes etc. All these market forces either increase or decrease the demand and supply of a

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

Breamer, J. (2009). Demand for corn and soybeans continue in 2010. High Plains Journal, (53), Retrieved from http://www.hpj.com/archives/2009/dec09/dec28/1228CropOutlookwspeakerpicj.cfm

The objective of this analysis is to focus on one of the recommendations about corn being able to be maintained at a certain rate for companies that buy it, as well as corn growers’ practices. This suggestion leads to a long term sustainability of agricultural production to eliminate high risks. This report provides information about serious causes that affect the corn production that lead to create strategies for future improvement. Companies attempt new ways to decrease shocks of the environment with time managing. Also, companies explore many solutions to manage their decisions about their supply factors to improve their corn agriculture alternatives in the future. Corn alone impacts a big piece of our economy.

In the 1970’s the world was threatened by severe food shortages and high food prices which were directly associated with increased oil prices. During the 1980’s, food prices were associated with the staple foods being of the lowest levels since the 1920’s. With the shift in the U.S. policies, this meant that the U.S. farmers had to reduce production to consumption level. The food prices increased again in the ‘90’s due to the high prices of oil.

Raw material prices of sugar and wheat, which constitute 55 per cent of have increased in the last 18 months. Consequently the margin of Parle G had decreased from 15 per cent to 10 per cent. The price consciousness of customer depends on the household income. The lower and middle class people are most sensitive to price change.

Competition within the industry as well as market supply and demand conditions set the price of products sold.

Taxes can be defined as an involuntary fee that is imposed on the public and enforced by the government. A tax is essentially the same as a rise in costs and obtains the same effects on both buyers and sellers. The most important effect that a tax has on the economy is to create a tax wedge between the amount that buyers pay and the amount that sellers collect. Tax can be calculated by subtracting the price received by sellers from the price that buyers pay. The laws of supply and demand determine who pays the greater burden of the tax. Who pays this burden has to do with the elasticities of supply and demand. The more inelastic side of the market will pay the greater share of the imposed tax. When demand is more elastic than supply, consumers will pay less of the tax than sellers. This is because consumers can and will find a substitute for the taxed product elsewhere, losing business for the supplier. On the other hand, when supply is more elastic than the demand for a product, buyers will end up paying more

Verdict & SAS (2013) states that global food prices look set to continue to rise in the next year. Increases in grain prices are having a knock-on effect on wheat, meat and dairy, while rising fuel prices will continue to exert an upward pressure on supply chain and logistics costs.

population witnessed food shortages causing high cereal prices. The food price spike led to the so-called “Bread Revolutions” resulting in a number of causalities (Nasim, 2012). In this regard, the focus of this article will be limited to agricultural foreign investments abroad.

Less interest rate charged by banks for agricultural inputs. Inflation may provoke higher wage demands from workers and raise costs. Higher national income growth may boost demand for a firm's products

For reflecting the company’s objectives and market conditions pricing strategies needs to be applied. Market conditions, competition, quality of the product, market place are the factors that influence of the product pricing. If the company has chosen a good pricing strategy for their products they will have good profit and good company positioning on the market in return. For setting the prices for products the Pricing strategy matrix can be used.

Political factors impact the agricultural sector in factors relating to regulation, distribution, and consumption of foods in a given country. Government policies and imposed regulations have a direct effect on nutritional choices that a consumer makes, and this, in turn, affects the agriculture market (KPMG, 2012). For example, policies governing food prices or the amount of information that a consumer will receive affects the choice of the consumer. Food regulation and safety measures implemented influence the supply of food products, and ultimately determines the market choice for consumers (KPMG, 2012). Economic factors have a direct effect on the agricultural industry. On one hand, the input cost such as the price of seeds, fertilizers, and cost of labor affect the productivity of the industry. The economic status of a country also affects the industry’s productivity. For example, in developing countries, the agricultural sector is less developed owing to limited resource input and poor infrastructure (KPMG, 2012).