Methods of Price determination   in the Market

Methods of Price determination   in the Market

  • Haggling (Bargaining). This is where the buyer negotiates with the seller for the suitable price of the during bargaining, the buyer keeps on reducing the price and the seller keeps on increasing until the agreed price is reached.
  • Auctioning (Bidding). The traditional auction process involves a succession of increasing bids or offers by potential purchasers until the highest (and final) bid is accepted by the auctioneer (who is usually an agent of the seller) e.g. livestock markets where farmers buy and sell animals, car auctions, auctioning of goods by government for people who fail to pay import duties, auctioning bank properties of  bankrupt customers etc.
  • Fixing by treaties (Agreements). This is where buyers and sellers come to an agreement to fix the price of the commodity.  The price remains fixed for a given time but the agreement can be renewed and prices can be changed.
  • Government determination (legislation).  This is where the government fixes the price of the commodity.  The government can either fix the maximum or minimum price.
  • Price leadership. This is where a large and low cost firm in the industry fixes the price of a commodity which has to be followed by other small firms.  This firm normally has a large share of the market.
  • Price fixing   by cartels.    A cartel is an organization of firms producing and selling similar products.  These firms come together and fix one price at which they have to sell the commodity to the consumers for example OPEC.
  • Interaction of the forces  of demand and supply.  This is where the price in the market is determined by the forces of demand and supply at a point where quantity demanded equals to quantity supplied.
  • Resale price maintenance. This is where the producer (manufacturer) fixes the price of a commodity at which the seller (retailers) have to sell to the final consumers. The price is usually written the commodity container. For example Newspapers, soft drinks. etc.
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    Tee Marc 10 months

    Haggling as a method of price determination is wrongly explained. The sellers do not reduce the price but rather the add, it is the consumer that reduces the price up to his/her ability to purchase the comodity if accepted by the seller. And it is under haggling you see the market forces of demand and supply at work.

    Two: Using a church as an example of auction sale is wrong. Auction sale is common in many local markets especially where used items are sold.

    Also, the is a lot of conflicting grammar in the explanation of Auction sale as a method of price determination.

    Good job though but always edit your write up before posting .

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