Will Bury

Will Bury

ECO/GM561

February 27, 2011

Will Bury

Market demand and price setting

Businesses with a strong market power can easily set the prices of it products and have a strong influence on the prices in its overall market. Will bury is researching the current demand for his digital audio book recordings to determine the best price for his product. Will need to determine the price of its product by looking at the amount of product available (supply) and how much the customers want it (demand). Based on the law of the market of demand, the higher demand, the higher the price. Will bury also needs to realize that market power is different from business to business. The less elastic a business demand, the more market it will have (Price elasticity, 2010, p. 1). Elastic demand refers to as large number of close substitutes for a business product. This means if elasticity is too high Will Bury cannot set the price for its products too high because his customers will switch to substitute products such as physical books. However, low elasticity of demand means customers have limited alternatives and will purchase Will Bury new products regardless the high price. The more market power Will bury business has, the less effect an increase in price will have on quantity of product demanded.

Labor Costs

To make more profit may require working longer hours, which may cut down on leisure or family time. For example Will Bury spends more time operating his business and as a result has missed most of his daughter important sport activities. Will Bury will not succeed in his business venture if he does all the production by himself. This means he will need to research the costs of hiring and training new employees, labor cost, and machinery costs used in the production process and production facilities. Hiring, training, machinery, production facility and labor costs requires an outlay of capital. The more capital spend on costs, the less the total profit...