1. How does the pricing of the resources (input) affect the pricing of the product or service in the grain market industry?  Or does it? 2. How important is the grain market makeup in determining...

1. How does the pricing of the resources (input) affect the pricing of the product or service in the grain market industry?  Or does it?

2. How important is the grain market makeup in determining pricing?  Does it matter if the market is influenced by government policy, be it local, state or federal? How?

3. Is the supply of the grain market industry you are studying similar to the supply conditions in any of the housing, health care or social security cases?

Asked on by cathy-cobb

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The pricing of resources absolutely affects the pricing of the grain that is sold in this market.  There are two ways to think about how this is so.

In business terms, one way to set prices is to base your price on the price that it costs you to produce the good you are selling.  This makes a great deal of sense because you do not want to (in most cases) sell your product for less than it cost you to produce it.  That would lead to you losing money.  In connection with this, we should also note that the markup definitely matters as well.  If you set your prices by looking at your costs, you will set your price at cost plus a certain amount of markup.  If you do this, both your costs and your markup affect the price you charge.

In economic terms, prices are set by supply and demand.  One of the main determinants of supply is the cost of producing the good.  This means that, if the cost of resources goes up, supply goes down.  When supply goes down, the price of the good increases.  Thus, we can see that from an economics point of view, resource costs do affect the pricing of grain or any other good.

In general, we would say that government policy can also impact pricing.  However, it does not override the impact of costs and markup.  Government subsidies, for example, can increase supply, thus lowering prices.  Even so, we must remember that these subsidies only affect the price; they do not completely determine it.

 Since I do not have access to your specific course materials, it is hard to know what information you have about the markets for housing, health care, and social security.  This makes it impossible to answer your third question as well as I would like.  We can say that the supply of grain, like the supply of these other things, is determined by things like resource costs, subsidies, technology, and the expectations of providers.  This is something that they all have in common.  Of course, the specific factors that affect the supply of the various products are very different.  Therefore, it is hard to say what the right answer for part 3 is.  The supply is similar in that the same factors affect all of these markets, but it is different in that the specific nature of those factors is different for each market.

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