ABSTRACT
This chapter considers the common ways of prices are set by sellers. If prices quickly respond to changes in supply and demand markets quickly equilibrate and price is the important allocator of resources. Price-setting approaches run the gamut from those which are demand-oriented to those which are supply or cost oriented. But approaches leaning toward demand must give consideration to supply and costs; those which lean toward the supply or cost side must also take some cognizance of the state of demand. Demand-oriented price setters must recognize that costs must be covered for a firm to continue its existence. Supply-cost-oriented decision-makers cannot blithely add up a set of costs to determine a price. Such a price could be high enough to make sales dangerously low. Products or resources are fixed in supply. Alfred Marshall extended this to cover an unspecified set of products during the market period a period in which by definition the supply is fixed.
