What determines price?

Nature of the market Prices is influenced by: The Nature of the Market Consumer Demand of Product Production and Marketing Costs Consideration of Channel Members Before pricing is established, you must recognize what type of market you are in: Pure competition, Monopolistic competition Oligopoly Monopoly

Pure competition In pure competition, there are many small firms marketing the same basic product; therefore, no single firm can dictate or offset the market Commodities such as wheat, barley, and sugar fall into this category because they have no choice but to charge the going rate of the products

Pure competition In the case of pure competition, it is the market that controls the price Often, the prices determined by the market rely simply on supply and demand Sometimes, the price can be determined by expectations about supply and demand for a certain product For example, if it was predicted that the supply of gas was to go down there would be a rush to buy gas forcing the demand to go up and the supply to go down This expectation would therefore cause a rise in the price of gas in the market

Monopolistic competition In monopolistic competition, there are many competitors selling the same product that, though similar, are perceived to be different by customers Companies selling good such as coffee, cereal, or tooth paste market their brand as “different” or “superior” in order to distinguish it from others Factors such as quality, service, style, function, and packaging are used to convey a difference to the consumer These qualities are known as “non-price competition” and create the presence that brands such as Colgate are superior products and can be sold for more

Monopolistic competition Traditionally consumers have been willing to pay more for a few items due to brand loyalty With the decrease in disposable income however this trend is shrinking Lower priced products therefore are becoming increasingly more successful in selling products rather than factors such as quality

Oligopolistic market In a oligopolistic market, there are a few large sellers of a particular good or service Examples od such industry's are the brewery industry (dominated in Canada by Molson and Labatt) and the gasoline industry dominated by (Petro-Can, Imperial Oil, and Shell) In oligopolistic markets, competitors watch each others actions and prices extremely closely For example, if a gas station raises or lowers its price, competitors will do so shortly after

monopoly A monopoly is when a single seller with no similar substitutes serves the market With this amount of power, companies can manipulate supply and demand and therefore change pricing in the market In Canada monopolies are rare but do exist, examples include SaskPower and Hydro- Quebec