FREE ESSAY ON PRICE FLUXUATION

PRICE FLUXUATION

PRICE FLUXUATION
There are many factors that can cause the price of a product to fluctuate. The product
that we are examining is a high quality mountain bike that has been set at a price of
fifteen hundred dollars. This price was reached by taking into consideration all of the
Laws of Demand. The need of a product to consumers greatly reflects the percent of markup
over the initial cost of production. A product is not always sold at a specific percent
above cost; many different factors are taken into consideration. There are numerous
research teams whose job is to study the economy and provide advice to larger companies
on how greatly their product is needed.
Although consumers may not approve, quite often prices increase without notice or
explanation. The distance between where the product was manufactured and where it is sold
has a minute effect on the price. For example, if the mountain bike were made in Sweden
it would roughly cost fifty dollars for it to be sent over to the United States.
Sometimes an event might occur and the popularity of a once unknown sport may increase
and therefore the price increases with the consumer's wants. A two hundred-dollar
increase in the price of a mountain bike would not be unheard of around the time of Tour
de France. A much more serious increase, like a five hundred-dollar increase, occurs only
in extreme circumstances and not as often as the less expensive price fluctuation. If the
mountain bike became extremely popular and most of the stores were sold out and not
expecting more until the next year, a dealer might hold a few a side with a very hefty
markup. 
A much more widely accepted price change is that of a price decrease. A fifty-dollar
decrease could occur with competition between two businesses. Sometimes when a business
is just beginning and they are trying to get their product out on the market they lower
the price. Such a decrease of two hundred-dollars would be seen in such a promotion. The
decrease in the price by five hundred-dollars doesn't happen as often as hoped. Such an
event like a recall on a product could cause the price to decrease by one-third of the
original price. 
In the world market it is not unlikely for a product's price to increase and decrease
rapidly due to many factors. However, the bigger the amount of increase or decrease the
less often the occurrence. It should be highly evident that any event can cause a product
to gain or loose value. For example, the increase in gas prices could cause more people
to ride bikes, therefore increasing the need for bikes and increasing the price. The
factors that effect prices of certain products are often not related.