p_eval04_l8_pric - 1.011 Project Evaluation Prices...

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
1.011 Project Evaluation Prices & Inflation Carl D. Martland 1. Review of prices 2. Price indices 3. Real vs. nominal discount rates
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
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
Image of page 2