p_eval04_l8_pric

p_eval04_l8_pric - 1.011 Project Evaluation Prices...

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1.011 Project Evaluation Prices & Inflation Carl D. Martland 1. Review of prices 2. Price indices 3. Real vs. nominal discount rates
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Review of Prices Prices are determined by the interaction of supply and demand Demand issues: Willingness-to-pay depends upon the VALUE of the service or product, not its COST The lower the price, the greater the demand Supply issues Min price > marginal cost (or supplier won't produce) Avg price > avg cost (or supplier won't make a profit) Choose design, production process, machines, materials for expected volume/demand and desired level of service
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