Why is price such a difficult variable to control?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Price is a difficult variable to control because so many things impact the price that a firm must charge.  These factors can be constantly changing and can be hard to measure.  For these reasons, it is hard to know what price to charge.

For example, the price a firm charges must depend to a degree on its costs.  Costs change as the prices of inputs change.  At the same time, firms have to be aware of and responsive to changes in demand.  If consumer demand is changing, the firm must also take that into consideration when setting price.  Finally, competitors' prices can have an impact on the prices a firm sets.  When setting prices, the firm must be aware of all of these kinds of factors and must try to both account for them and predict future changes.  This makes seting the price of a good or service rather difficult.

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