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Assignment on Price Determination - Polo Mint UK

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Added on  2020-11-23

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Factors in determining theprice of Polo Mints in UK
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Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1Supply and demand diagrams showing relationship between supply, demand and price......1Equilibrium point in the diagram...........................................................................................3PART B............................................................................................................................................4Reasons of changes in demand...............................................................................................4PART C............................................................................................................................................6Reasons of changes in supply.................................................................................................6Impact of changes in supply and demand on price.................................................................8CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
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INTRODUCTIONDemand and supply are the two main elements that are used by economists for the purposeof determination of price in the market. Both these components get affected due to fluctuation inprice of goods and services. Relation of such two factors with rate is known as demand andsupply relationship (Cartwright and Cooper, 2014). This report is based on price determinationof price of Polo mints in UK. It was firstly manufactured in UK in year 1948. Various topicssuch as demand and supply diagrams to explain relation of these two and price, equilibriumusing these diagrams, reasons that leads to a change in such elements and impacts of changes inthese factors will have of price have been covered under this report.PART ASupply and demand diagrams showing relationship between supply, demand and pricePolo mint is a peppermint flavoured mint with a hole in middle and this essay is all about itsprice determination. It was firstly manufactured in year 1948 in UK and its idea was proposed byJohn Bargewell. Supply and demand are two different components of microeconomy which isused by economists to analyse impact of price upon both of them. When changes then it affectsdemand and supply of items. The rate which is set by organisations to its goods is depends uponmarket requirement if it is high the price will be high and in opposite situation it will be low dueto less demand of items by customers (Friedman, 2017). It is vital for all the companies toanalyse market conditions and then form decisions regarding pricing. If price is very low then itmay create risk for the company of not generating appropriate amount of profits. In order to keepclients happy and attain higher profits managers of Polo mint try to ignore imbalance in supplyand balance customer’s demand with its supply. Business entities can sale all the products inhigher price if its supply is very good but if it becomes too high then it leaves negative impact onthe company so while formulating pricing decision the managers of Polo mint are required toanalyse market conditions. In such type of situation enterprises should lower the rate and attractnew buyer in order to achieve long term sustainability.Demand and price of goods are inversely related to each other because most of the time whenprice decreases the demand get increased and in opposite situation it gets decreased. Whencompanies set very high prices then substitutes try to capture their market share by attractingtheir customers. For example, if Polo mints increases its price suddenly then its substitutes can1
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try to capture its market share by decreasing their prices proportionally. When polo mints werelaunched, they were unique for the customers which was resulted in its higher demand in themarket. All the manufacturers do not want that their products remain unsold so they try to setsuch price for all the items that may result in higher demand and supply of them. From the aboveanalysis it has been identified that demand, supply and price are related with other all of themaffect each other. It is very important for managers of Polo mint to consider all the factors thatmay affect its profits so that appropriate and attractive pricing strategies can be formulated (Hilland Porter, 2016). The following diagrams can show the relationship of demand, supply andprice:Relation of demand and price:(Source: Relation of demand and price, 2019)The above diagram shows that if price of polo mints gets decreased then its demand willbe increased. It shows that both of them are related to each other if organization is willing toincrease demand of its profits then it is vital for company to decrease price of the items so thatnew customers can be attracted towards goods.Relation of supply and price:2
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