Marginal price - the maximum or minimum acceptable price for a sold product, regulated throughout its life cycle. Setting price caps is the prerogative of the authorities, an example is the pricing policy in the field of utilities, in particular, electricity.
Instructions
Step 1
Setting price caps is one of the elements of government regulation of the market. The purpose of this government intervention in trade relations between buyers and sellers is to create an environment in which their interests are properly intersected. Limiting prices allows you to protect consumers from unjustified overpricing, inflation, monopolists, to ensure the economic security of the country as a whole.
Step 2
As a rule, the setting of price caps and corridors (the price interval between the extremely high and the extremely low price) applies to the following types of products and services: gas, electricity, operations with oil, precious metals and stones, railroad transportation, air transportation, postal services, telecast - and radio broadcasts, funeral services, etc.
Step 3
The marginal price is calculated by means of the theory of marginal analysis, which uses mathematical methods, for example, differential calculus. The analysis is based on a comparison of projected costs and revenues, which may result from certain values of the calculated value. Thus, the optimal price is derived, at which the ratio of consumers 'expenses and producers' profits balances each other as much as possible.
Step 4
The domain of the mathematical function of the marginal price is a set of values that are obtained by changing the marginal indicators with an increase in the volume of production by one unit. In this case, the concepts of marginal costs, benefits and marginal utility are considered. The function graph tends to the value at which the ratio of these concepts will be optimal.
Step 5
The main principle of marginal analysis: the achievement of a production option in which the marginal benefits will be equal to the marginal costs. The economic well-being of society is based on the same principle, which is based on the rational use of resources in the production of goods or services, which, in turn, allows setting reasonable prices that fit within the established limits.
