Marketing-Price:In the market economy, prices are determined by the level of supply and demand for a given product. The demand of a given product refers to the amount that the consumers are ready and able to purchase at a set price. The law demand denotes that when increase in prices will lead to declining in demand and decline in prices will lead to increase in demand if all other factors in the market remain constant. The supply of a given product denotes the amount a company or business is ready and able to supply to the market at the existing price. Therefore, when prices are high the firm will supply more products, and will be unwilling to supply more when the prices decline due to the low-profit margins.
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“Price is what you pay; value s what you get.”
This quote implies that the value and price cannot always mean the same thing. Intrinsic value or worth is what the consumer gets, and it denotes the discounted present value of future incomes or cash flows. For example, if the estimated intrinsic value of a security is 20 dollars. The price of this security may change due to market cycles to between 40 and 20 dollars by either rising by 100 percent or declining by 50 percent of the intrinsic value; however, the intrinsic value of the security remains unchanged.
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