State the price determination under the market condition
The price determination under the following market condition is as follows:
1) Pure competition: in this situation there is no control over the selling prices. The pricing policy in this case is generally to recover the marginal cost and above it the contribution as much as it may be possible to recover.
2) Monopoly: the seller's price prevails. If the margin of profit is inordinately high the demand of customer for the product falls down and at low price the demand goes high. Therefore the best thing in this situation is to maximize the profit by eruptional cost with marginal revenue.
3) Monopolistic competition: where monopolists start earning huge profits competitors start creeping into line with substitutes introduced are generally low priced. To maintain marketability of the product cost reduction and quality improvement programmer are undertaken and efforts are made to sell the product at reduced price or the improved product at the same original price.
4) Oligopoly: where a few large sellers control the major part of the market the situation is termed oligopoly. In this case the small sellers behave in the manner as the oligopolies do. If the large sellers increase or reduce the price small ones also increase or reduce their price to that extent otherwise there is risk of sales being curtailed in case price is increased by the individual seller.