Why it is important that prices are flexible in our economy

Flexible Pricing


When the final price at which a certain product or service is sold out is not fixed, prices are said to be flexible. This means that it is negotiable between buyers and sellers and is frequently used when goods or services are modified to meet the needs of clients. Pricing in an economy should be flexible since it aids in reaching the potential of an efficient marketplace. This is because customers may easily find the price of a good or service that they are capable and willing to pay when prices vary regularly but with minimal variation in demand and supply. For instance when traveling by plane, one can choose to travel on an economy or business class depending on the amount of money that they want and can afford to spend. Another example is when a customer negotiates the price of cloth with a tailor basing on the market rates. Conclusively, it should get noted that flexible pricing may upset customers, for example, when prices of soft drinks such as soda changes on the weather (MBA Skool, 2016).


Government Control on Prices


The government should not control the prices for products that are imperative because this will alter the market nature and hence result to oversupply or shortage of the commodity. For instance, when the price of gasoline is fixed to a lower price, many people will buy it thus resulting in a shortage of gasoline. This can also lead to a rise of black markets where gasoline will get sold expensively. Additionally, equilibrium price will never be attained because the prices set by the government will be either too high or too low. Therefore, government pricing on essential products will create more problems than solving them (Pettinger, 2011).

References


MBA Skool. (2016). 4 Ps of marketing (Product Mix). Retrieved on March 11th, 2017 from http://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/6778-4-ps-of-marketing.html


Pettinger, T. (June 30th, 2011). Price controls - advantages and disadvantages. Retrieved on March 11th, 2017 from http://www.economicshelp.org/blog/621/economics/price-controls-advantages-and-disadvantages/

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