Economic content of world and domestic prices. Factors influencing price formation.
Let's move on to the pricing factors.
All their diversity can be reduced to three enlarged groups:
- The basic ones;
- The economic factors are the following: basic; they are conjunctural;
- regulating.
The basic factors are different costs of internal and external nature. Changes in prices under the influence of these costs are directly proportional to changes in costs. Conjuncture factors - a consequence of market volatility, depend on macroeconomic conditions, consumer demand, etc. Regulatory factors are determined by the degree of state interference in the economy. There is a division into internal and external. Internal factors depend on the producer himself. External - on the contrary.
Internal factors include:
- Effectiveness of advertising activities;
- Specificity, degree of uniqueness, level of quality of products;
Features of the production process, for example, mass-produced goods have relatively low costs;
- in comparison with small-scale production;
- market strategy and tactics of the producer (is the producer oriented to one or several market segments?);
- nature and specificity of the life cycle of goods; duration of promotion of goods along the chain from the producer to the consumer; image and authority of the producer in the internal and external markets.
External pricing factors:
- political situation in the country where the goods are produced;
- Availability or absence of labor, material and other resources in the market;
- the nature and principles of public policy; - the level, rate of change and other dynamic characteristics of inflation;
- scale and segmentation of the market;
- Market volume and characteristics of actual and prospective consumer demand;
- Availability, level and nature of competition in the market of similar products. There is also a division into the following groups of factors.
The impact on price dynamics is singled out:
1) contributing to price reduction:
§ production growth;
§ technical progress;
§Cost and circulation reduction;
§ increase in labor productivity;
§competition;
§Reduced taxes;
§Expansion of direct links.
2) contributing to price growth:
§Monopoly of the enterprise;
§Increase in the amount of money in circulation;
§Increase in taxes, increase in wages;
§Increase in the company's profit;
§ Improving the quality of goods;
§ Fashionability;
§Increase in the price of the labour force;
§Low efficiency of capital, equipment, labor, land use.
Prices are subdivided by the main areas of impact on prices:
1) production factors:
§Cost of sales, which determines the level below which prices should not decline (excluding dumping pricing policies);
§Production capacity level;
§The level of financial position;
§The level of business activity.
2) demand factors:
§The relationship between supply and demand;
§Price elasticity;
§Market segmentation.
3) market competitive factors:
§ level of monopolization and competition in the market;
§Market pricing policy.
4) product characteristics factors:
§ novelty, uniqueness, quality.
As additional factors that influence the elasticity of demand and price, are singled out:
Availability of substitute goods:
the more they are, the more elastic the demand is;
Share of consumption for this product in the consumer's budget: the higher this share is, the greater the elasticity;
The degree of necessity of this product: the elasticity of demand is lowest among those goods that are useful for the consumer from the point of view of the consumer;
Width of use of this product: the more directions of its application, the more elastic the demand is.