Pricing in which a business could implement adverting method

Pricing
discrimination is when a company charges a different price to different groups
of people for the same good or service.

There are
many reasons as to why a company would want to implement a pricing
discrimination. Firstly is helps firms to become more profitable .This could
thus enable a firm to invest in increased capacity. An example could be a baker
maximising profits from price discrimination to invest in updating machinery
that is used to bake. Another reason as to why they would want to introduce it
could be because some groups benefit from cheaper prices. Price discrimination
means that firms have an incentive to reduce prices for some consumers who are
quite cautious of prices. This could be students who receive student discount
so they could receive items cheaper as compared to someone who is a working
professional.  An example of a price discrimination
graph can be seen below:

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This graph
shows price discrimination as a profit maximising strategy.

Another
reason why a business would use discrimination is to avoid congestion. Price
discrimination is a way in which business can avoid congestion. It’s a way of
managing demand. If there was no price discrimination for cheaper prices public
transport services would thus be more overcrowded.

The final
reason why biscuits manufacturers would use price discrimination is because
they would be able to capture 100% of the available consumer surplus. They
would be able to encourage consumers to purchase larger quantities of their
goods and would be able to offer them better prices than if they were to buy a
small batch.

3b

Non pricing
competition is the process of using advertising and marketing strategies to
increase consumer demand and also help develop brand loyalty.

The first
way in which a business could implement adverting method to gain attention from
customers is by applying discounts to products and offering deals on them. This
could be done through buy 1 get 1 free promotions. This could catch the eye of
consumers as it would encourage them to pay for a product as these would
receive the same item for free.

The second
way in which a business could use a non price strategy is by having a loyalty
card system. The benefit of brand loyalty cards is that it helps increase
sales. Loyalty cards help improve customer retention and this encourages them
to purchase more. This draws them in and encourages them to keep coming back.

The next in
which non pricing competition would be implemented is by offering free
shipping. In many instances free shipping can sometimes increase sales revenue.
This could be because it gives shoppers the incentive to add more to their
shopping basket as they know that they would be receiving the items that are
delivered for free. With this it is also proven that many shoppers online would
possibly not want to purchase an item online if there are high shipping costs
so providing free delivery for customers is a win win situation .

Question 4B

The impact
of there being an increase of the price in dollar against the UK pound can have
a big influence on UK biscuit manufactures. This is because the sugar that they
would be purchasing would become much more expensive for them and they would be
losing their value for money. An example of this is maybe previously £500 would
have got company 50 boxes of sugar cubes. With the value of everything falling
this could now result in that £500 only bringing in 40 boxes of sugar cubes. As
a result of this the manufactures would now need to pay more money to receive
the required amount of sugar that they needed and therefore costs will increase
because they would have to import the products from America. Question 5a

Trade
agreements are between two or more countries where they often come to an
agreement for the exchange of goods and services between the two parties. With
the UK leaving brexit soon this could be at a loss to many of the UK biscuit manufactures
within the UK as it could become very expensive from them to import and export.

The first
disadvantage from the biscuit industry is that it there would be reduced tax
revenue for the biscuit firms. This is because many off the smaller countries within
the EU would struggle to replace revenue lost from the import tariffs and also
the fees.

Another
impact that could have an effect on biscuit manufactures within the UK is that
the EU is the largest trade partner. Previously the EU membership made is
cheaper for the UK to be able to send goods abroad between them and Europe.
This made is cheaper for UK businesses to export more and it also made goods
and services cheaper for UK consumers.

In addition
to this with the UK leaving brexit it would lower trade between the UK and
Europe as there would be higher tariff and non tariff barriers to trade. With
this being said UK would also lose out from market integration in the near
future within other European countries.

Finally with
the UK not being in the EU it means they wouldn’t benefit from the future EU
trade deals that they would thus be having with other countries.

 

Question 5b

Inflation is
when there is a continuous rise in the general price level off goods and services.
Within the year of 2016 the UK inflation rose to a peak of 2.9%.

The first
reason as to why inflation could become a problem for UK biscuit manufactures
is because it could lead to import costs rising as 1/3 of goods within the UK
are imported from abroad. With devaluation is means that import prices would
increase leading to an increase in inflation. Another reason as to why
inflation could have been rising is because of rising wages. This is because
trade unions are able to bargain for higher wages for their employees. Rising
wages are a cost of cost push inflation due to the fact that wages are a very
significant cost for many firms. To add to this in the year of 2016 profit
could have been a reason as to why inflation increased.

High
inflation could lead to a recession within an economy. This type of inflation
could be named as cost push inflation. This can happen when prices are rising
more than wages. The result of this is that consumer spending would thus
decrease and therefore it would cause a recession within the economy.

The graph
above shows how aggregate demand is leader to lower inflation .A recession is
where the economy declines continuously for a long period of time. There’s a
drop in the 5 economic indicators; Real GDP, income, employment, manufactures
and retail sales.

There are
many ways in which the government can avoid going recession/slow it down .The
first way is cutting interest rates. Cutting interest rates would help boost
aggregate demand. Aggregate demand is the total demand for goods and services
within an economy at a given time. Lower interest rates would reduce the
mortgage payments interest. As a result of this it would give customers more
disposable income. When interest rates are low it also encourages firms and
consumers to spend rather than save.

Another way
to reduce the chances of recession would be encourage the imports of high price
commodities. Encouraging imports let the de regulated market determine the
price of commodity. When commodities are high within a country this discourages
exports and encourages imports by placing high taxes on them. This would bring
the price level to a normal level.

In addition
to what was said above a way in which the likelihood of recession could be
reduced is by encouraging foreign direct investments. By letting foreigners who
are quite wealthy start businesses within your country it can help the economy
to flourish. With this it creates jobs within the economy and also brings in
fresh cash flow into the country.

The final
method in which the UK government could use to reduce the chances of recession
is by encouraging exports.  Exporting
goods help to keep foreign currency reserves in good health and the benefit of
exports is that it wouldn’t cause inflation within your given country. The
encouragement of export would also turn the country from consumer state to a
producer state.