Elements of a price study

A correct determination of the optimal price of a product under criteria of income, profitability and competitiveness goals is essential in the success of organizations.

The study of prices has great importance and incidence in the market study, since the success of the product or service to offer will depend on the fixing of the price and its possible variations.

The price is defined as the manifestation in exchange value of a good expressed in monetary terms, or as the amount of money that must be delivered to acquire a good.

In market or free competition economies, the price is determined by the relations between supply and demand and its fluctuations have as a minimum limit the cost of production, which could be exceeded only under exceptional conditions and if it has the capacity to absorb the lost.

The prices of factors of production together with the prices of goods and services form the general price system, which acts as an indicator of production and consumption, making the decisions of economic agents more coherent. At a certain time and under the same circumstances, the price of a good can be one and the other, it can vary supply and demand. There is no doubt that the higher the price, the lower the demand and the greater the supply, and when the price decreases, the opposite will happen.

Prices: A price too high may represent a decrease in demand, a price too low the end of profitability.

In economic relations there are a wide variety of prices for goods and services, which can be classified into various categories according to their characteristics.

According to their origin: Agricultural, industrial and service prices. According to the power: State: intervened and not intervened. According to the markets in which they operate: Perfectly competitive market prices, monopolistic, monopolistic. According to the volume of transactions: Prices per wholesale and retail prices. Depending on the geographical area: national, regional and international.

From this categorization, it can be seen that for any price study, it is necessary to have sufficient information on the prices prevailing in the domestic market, on the prices of imported products, on the prices established according to the cost of production and, if they exist or not., prices regulated by the State.

An income and expense budget must be analyzed in every project, and this will require estimating the prices that are likely to govern both inputs and outputs.

These prices are not equal to market prices, but correspond to a value assigned to goods in terms of how much society is worth producing them.

In the event that the State sells services and applies differentiated rates for the consumption of water, electricity and telephone depending on the type of consumer or the sector it serves, the determination of the price must cover at least the total cost of production.

Entrepreneurs, on the other hand, are governed by the level of profitability or benefits they expect to receive by establishing a margin of price tolerance, which allows them to participate in the game of the market by varying prices to limits allowed by competition.

When projecting demand, estimates are often made under the conditions of CETERIS PARIBUS, varying a function in relation to one variable, the others remaining constant and many times neglecting the analysis of current and future prices, without even assuming that during the During the life of the project, there may be price changes that would modify the cost structure and therefore the levels of profitability and profit.

Only under monopoly conditions, companies can control prices, otherwise, the determination of the price will be a crucial element in the success or failure of a product or service, either due to excess price and low demand or low price, few income.

In any price study, therefore, the variables mentioned above must be analyzed.