The Factors That Can Change the Situation in the Prices Charged by Companies Essay

There are some companies that operate in the low calories, microwavable food industry hence bringing about competition. In essence, there are many industry players. Regardless of the intensive competition, there are always tow leading companies in the industry that comprise healthy choice and lean cuisine. Due to their operation, the two firms hold a significant market share in the industry. These companies compete by coming up with the differentiated products from each other. Due to this, they make the companies enjoy monopoly that is partial therefore acting like the monopoly. This is what makes the firms have some pricing power over what they produce. In this case, there is a power of monopoly given that the products are differentiated thus every independent company can fix a price that they wish on all the products they produce depending on the level of profits they wish to attain. In so doing, it increases the margins of profit since the prices are more than the competitive market prices (Nicholson Snyder, 2012). The variation between the average revenue and the average cost is in most cases bigger. Further, these companies are faced with the inelastic price demand for their products meaning that the companies are in the position to come up with good percentage earnings in terms of cost margin of the price.Form the initial assignment 1, the demand equationDQ-5200-42P 20Px 5.21 0.20A 0.25M.The preceding results for the firm were computedThe price elasticity of demand was 1.1898The elasticity of demand for advertisement 0.1133The gross elasticity of demand 0.06799Income elasticity of demand 1.6204Own price elasticity of demand in this matter is more than one which is an indicator that the demand is elastic and rise in price will impact demand adversely. A reduction in the prices leads to an increase in the level of demand (McGuigan, Moyer Harris, 2014). Thus, the corporations will set determine the prices based on the desired level of profits...

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