Chapter 11.2, Problem 2R

To determine

To analyze: The way following concepts affect price.

Answer to Problem 2R

Supply inversely affect the price whereas demand directly affects it.

Explanation of Solution

Concepts	How it affects price
Supply and demand	When supply decreases and demand remain same, price tends to increase and vice versa. When demand decreases and supply remains same, price tends to decrease and vice versa.
Penetration pricing	When a business uses penetration pricing, that means it has a low price for its products.
Price leadership	In price leadership, the large firm fixes the price and the other small firms follow the same.

Economics Concept Introduction

Introduction: Pricing is an important aspect of a product. It is determined by the supply and demand forces. A lot of expenses and other factors are considered before setting a price so as to cover all the expenses and makes some profit on the sale.