3A

3A Economics Discussion
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Sellers can opt to raise commodity prices and reduce their sales volume, but earn more revenue on each commodity. Alternatively, they can lower the price, increase their sales volume but generate less revenue on each commodity sold. Businesses have to make wise pricing decisions for maximized pricing. Different methodologies can be used to determine the best decisions to make. These include:
Psychology Pricing
When the economy keeps fluctuating, the major concern becomes the prices of commodities (Woodruff, 2018). As time passes, information about price increase spreads rapidly and therefore more customers react to the change.
Customers’ response to commodity prices is by looking for the best alternative (Froeb, 2016). Regardless of how little the increase is, customers focus on the lower price. For instance, when a bank in Evanston Indiana raised the ATM transaction fees from $1.5 to $2.0, customers avoided the higher priced ATMs after realizing the increase in the fees.
Economy Pricing
This methodology is common in businesses such as discount retailers and food suppliers. Economic pricing attracts more customers by selling their products at a reduced price (Robb, 2017). This helps them to attract more customers to their shops.
For instance, the MidSouth lowered the three liter Coke price to 1.5 dollars. Even if the price was too low, the managers of the store wanted to use the Coke as a way to attract customers who would spend to purchase other items in the store.

Premium pricing
Businesses that employ this type of pricing strategy sets the prices of product higher than their competitors (Tejvan, 2015). Premium pricing is common in businesses selling unique commodities. When the prices of products are raised, sometimes the sales reduce.
For instance, in the District of Columbia, the owners of gas stations were arguing against the law to raise the price by 6$ which they predicting would reduce the quantity sales by 40%. These gas station owners were emphasizing on price elasticity. With an increase in the price, the tax collected and the sales would reduce.
These methodologies ensure reasonable profit especially when the commodity pricing is lowered. Increasing the premium pricing, the commodity pricing is increased. Even if the customers cannot justify the product quality, they still buy the product. This does not ensure reasonable profit. Even if the product is not of high quality, the customers might still buy them which will not ensure total honesty.
References
Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2016). Managerial economics: A problem solving approach. Boston, MA: Cengage Learning.
Robb. (2017). Pricing Strategy for Products: Economy, Skimming, Penetration, and Premium. Retrieved from https://fa-cpa.com/pricing-strategy-for-new-products-4-methods/
Tejvan. P. (2015). Premium Pricing. Retrieved from https://www.economicshelp.org/blog/glossary/premium-pricing/
Woodruff. J. (2018). Different Types of Pricing Strategy. https://smallbusiness.chron.com/different-types-pricing-strategy-4688.html