Discussion 7- economics-pricing strategies Assignment

Discussion 7- economics-pricing strategies - Assignment Example Since producers have no control over the market prices, they can only control how much they produce. For production, firms in pure competitive market evaluate both the prices for selling their goods and the cost of production. If the analysis leads to greater profit maximization margin, the firm increases its production. Firms in a competitive market maximize profits or minimize losses by evaluating marginal revenues against marginal costs (Reynolds, 2011). Since there are many producers, each makes up a small portion of the total market. No particular producer can influence market prices. The demand curve for the various producers in pure competitive markets is completely elastic (horizontal). Producers in pure competitive markets are price takers. Such producers have the power to sell their products as much as they can produce. If competitors change their prices in pure competitive markets, consumers are willing to switch their demands to the most competitively priced products. In such a case, cross-price elasticity increases since consumers have other available options at better offers. If one producer raises the price, demand goes to