Economic Business Analysis Pricing Decisions and International Tradin

Question: Discuss about theEconomic Business Analysisfor Pricing Decisions and International Trading. Answer: Part 1 If in the whole market am the only supplier of a particular product, it means that I face no competition and therefore has some monopoly power. This power allows me to have control over both price and output; meaning that I can vary any or both to maximize my revenues. If am wishing to have a lower the price strategy to increase my revenues. I wont consider many factors since the law of demand allows for demand to rise when prices are lowered (Arnold, 2010). What I will consider is the cost I incur in producing the product. I have to ensure that I sell at a price that exceeds the production cost. Since am the only producer, I have greater economies of scale and thus even at lower prices, the profit margin will still be high since more units will be sold. The other factor I will consider is the price elasticity of demand. I will only lower prices if demand is price elastic. The toughest situation comes in when deciding to increase the prices. The profit maximizing revenue is raised when Marginal Cost (MC) = Marginal Revenue (MR). I would raise the price if demand exceed my supply, also, when the product am supplying does not have a close substitutes. With the presence of a close substitute, demand for my product will fall if I raise the price. The demand must be price inelastic which means that demand wont change much when price have increased (Cordes, 2005). If the cost of production increases, the price offered must also be higher to avoid making losses. Part 2 First, its hard to find a country that is more efficient in producing all goods compared to all economies. Its noted that most economies have a comparative advantage in the production of a certain product and this is what facilitates trading since each specializes in what its good at producing and trade it with that which its not good at producing. Burns (2016) noted that no single country has all the production elements; they need to import. Economies are never self-sufficient (Gordon, 2016). However, if an assumption is made that such a country exist, still there would be a need for trading. The argument here is that, the product need a big market. The efficiency to produce will result in more products being produced. The domestic demand for these products may be not sufficient and thus the products would only sell at a lower price. Trade is a major source of economic growth for many economies as it earns a country a great level of foreign exchange. Trading helps in the regulation of prices (Economicsonline.co.uk, 2017). For instance, if the domestic prices are too high, importing of such commodities at a lower price makes the demand for domestic products to fall resulting in a price cut. Similarly, when prices are too low, the demand for exports will increase resulting in prices being pushed upward. Trade promotes economic growth as it creates more jobs to the citizens; the number of employed persons goes up. There exist business cycle and thus production of certain goods may be difficult to produce sometimes. The deficiency in supply can only be solved through imports. References Arnold, A. (2010). Economics. Australia: South-Western Cengage Learning. Burns, R. (2016). What is the importance of international trade? quora.com. Retrieved 26 January 2017, from https://www.quora.com/What-is-the-importance-of-international-trade Cordes, J. (2005). The encyclopedia of taxation tax policy. Washington, D.C: Urban Institute Press. Economicsonline.co.uk. (2017). Why do countries trade? Economicsonline.co.uk. Retrieved 26 January 2017, from https://www.economicsonline.co.uk/Global_economics/Why_do_countries_trade.html Gordon, J. (2016). What is the importance of international trade? quora.com. Retrieved 26 January 2017, from https://www.quora.com/What-is-the-importance-of-international-trade