Long-Term Investment Decisions Essay Example | Topics and Well Written Essays - 1250 words

Long-Term Investment Decisions - Essay Example The consumer will have to consume the commodity as normal even if the prices are increased. The managers thus should consider the reactions from the competitors before raising prices. Since consumption of the food is maintained, increasing prices may lead to rival firms to sell more units than the firm. This will reduce its sales and market share and hence loses a lot to the competitors. Consumers usually have believed that high prices are associated with high quality. If the firm wants to attract more sales, they should consider increasing quality or rebrand the product as this would change the consumer’s perception of the product in a positive way. They would thus increase their purchasing power making the firms to have high sales. Managers should also have a good timing as to when to increase the prices. During low seasons of the business, they can keep the prices low so that they keep with the increased customers demand however little it may be. These losses can then be recovered in off seasons through producing more units at high prices. For example, during festive seasons and holidays, consumers spend more than expected. The government usually enters into the production process majorly by providing incentives and changes in taxation. Providing subsidies lowers the production cost of the company. The company is able to produce more and increase the market supply (Tisdell & Hartley, 2008). To increase production, they will hire extra labor leading to employment in the economy. As supply increases, demand is relatively constant leading to low prices to the consumers. However, if the government does not provide subsidies, the company operations cost will be high and hence reduce output and will lay off workers leading to unemployment in the economy. This decreases supply and since demand is high, prices will increase leading to inflations in the economy. The government can decide to use tax