Price Fixation and Inflation

A manufacturer produces goods. A manufacturer can be an individual, organization or business. Various raw materials are needed to manufacture various goods. Land, manpower and organization are the resources needed for manufacturing goods. Such resources need to be paid for their services. For example, the loan should be paid for credit, wages for labour etc. Such payment and expenses are called investment. According to the investment, the marked price of a product is determined. The prices of the goods are determined after adding tax fixed by the government. Government donates to the investors for their manufacturing. In this case, the prices of the goods are even lower than the marked price.

The price of an object depends upon the nature of the market. If the manufacturer has monopoly power in the market then manufacturer himself decides the price of the goods. But the monopolist manufacturer should decrease the price of the goods if he wants to increase the sale of goods. If he doesn’t decrease the price of goods then the sale of goods may be less. In the competitive market, the number of producers, distributors and consumers of same goods or products may be more. In such market, the price of goods is determined according to the available resources and demand of the consumers. When the price of the goods is less, the consumer demands the more quantity of goods whereas when the price of good rises, the consumer demands it comparatively less. Finally, the amounts of the goods are decided by balancing the cost of the manufacturing and the demand of customers. If the price of the goods is more than the price decided by the manufacturer, then the supply of goods is more than the demand. There creates a competition among the producers for decreasing the price of goods due to the high amount of supply. As a result, the price of goods decreases up to the price decided by the manufacturer. But if the price of the goods is less than the price decided by the manufacturer, then the demands of goods is more than the supply of goods. As a result, the competition among the consumers and demanders gets created as the demand of goods is more than that of supply and the price of goods rises.

Things to remember

• Manufacturer can be an individual, organization or business.
• Land, manpower and organization are the resources needed for manufacturing goods. 
• The price of an object depends upon the nature of market. 
• The competition among the consumers and demanders gets created as the demand of goods is more than that of supply and the price of goods rises.

• It includes every relationship which established among the people.
• There can be more than one community in a society. Community smaller than society.
• It is a network of social relationships which cannot see or touched.
• common interests and common objectives are not necessary for society.

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