Podcast
Questions and Answers
What is the primary criterion for a price to be considered 'fair' from a supply manager's perspective?
What is the primary criterion for a price to be considered 'fair' from a supply manager's perspective?
- The price that ensures the supplier earns the maximum possible profit.
- The lowest price that allows for a continuous supply of required quality goods when needed. (correct)
- The price that matches the average of all prices in the market for similar goods.
- The lowest price available in the market, regardless of supplier profitability.
Which of the following must be covered by a supplier’s total sales in the long run in order to ensure a continuous supply?
Which of the following must be covered by a supplier’s total sales in the long run in order to ensure a continuous supply?
- Only costs that are essential for the production of a particular item.
- Sales must equal to twice the cost of the total production costs.
- Total costs, including a reasonable profit of the supplier. (correct)
- Only direct production costs for all items in their product line.
Why might a 'fair price' for the same item vary between different sellers?
Why might a 'fair price' for the same item vary between different sellers?
- Because some sellers may choose to collude on prices.
- Because the overall market demand may sometimes cause prices to be set arbitrarily.
- Because one seller may use more expensive materials
- Because of differences in their production costs, operational efficiencies, and potentially substitute items. (correct)
When is a prevailing market price NOT necessarily considered a 'fair price'?
When is a prevailing market price NOT necessarily considered a 'fair price'?
What is required for supply managers in order to determine a 'fair and just price'?
What is required for supply managers in order to determine a 'fair and just price'?
What is the most crucial factor in establishing a 'fair price' that ensures ongoing availability of a product in the long term?
What is the most crucial factor in establishing a 'fair price' that ensures ongoing availability of a product in the long term?
Under what circumstances is it acceptable for a specific item within a product line to not contribute its full financial share over a given period?
Under what circumstances is it acceptable for a specific item within a product line to not contribute its full financial share over a given period?
What may cause a 'fair price' for the same or similar items to differ between suppliers?
What may cause a 'fair price' for the same or similar items to differ between suppliers?
When can a price that is set by a monopolist or through collusion NOT be deemed unfair simply because of its origin?
When can a price that is set by a monopolist or through collusion NOT be deemed unfair simply because of its origin?
Beyond ensuring a continuous supply and acceptable profit, what else should a 'fair price' consider?
Beyond ensuring a continuous supply and acceptable profit, what else should a 'fair price' consider?
Why is a prevailing market price not always a reliable indicator of a 'fair price'?
Why is a prevailing market price not always a reliable indicator of a 'fair price'?
When determining a 'fair price', what role does a supply manager's accumulated knowledge and experience play?
When determining a 'fair price', what role does a supply manager's accumulated knowledge and experience play?
If a supplier is a monopolist, what aspect is most important when evaluating if their price is 'fair'?
If a supplier is a monopolist, what aspect is most important when evaluating if their price is 'fair'?
What factor allows a supply manager to make a correct judgement about 'fair price'?
What factor allows a supply manager to make a correct judgement about 'fair price'?
Which of the following best describes a supply manager’s role relating to 'fair price'?
Which of the following best describes a supply manager’s role relating to 'fair price'?
Flashcards
Fair Price
Fair Price
The lowest price that ensures a consistent supply of the right quality at the right time.
Supplier Profitability
Supplier Profitability
A supplier needs to make a reasonable profit to stay in business and continue providing goods.
Cost Coverage
Cost Coverage
The price should cover all costs, including direct costs and a reasonable profit. Even though one specific item may not cover its full share, the price should at least cover its direct costs.
Fair Price Variations
Fair Price Variations
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Fair Price & Monopolies
Fair Price & Monopolies
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What is a 'fair price'?
What is a 'fair price'?
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Why is supplier profitability important?
Why is supplier profitability important?
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How are costs related to a fair price?
How are costs related to a fair price?
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What if one item doesn't cover all its costs?
What if one item doesn't cover all its costs?
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Can fair prices vary for the same item?
Can fair prices vary for the same item?
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Do monopolies make prices unfair?
Do monopolies make prices unfair?
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Is the market price always fair?
Is the market price always fair?
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How does a supply manager determine a fair price?
How does a supply manager determine a fair price?
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Why are logistics costs important?
Why are logistics costs important?
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What's the key to determining a fair price?
What's the key to determining a fair price?
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Study Notes
Fair Price in Supply Management
- A fair price ensures a reliable supply of high-quality goods and services at necessary times and locations, prioritizing quality and availability over the lowest possible cost.
- Long-term continuous supply requires a supplier who is making a reasonable profit.
- Supplier total costs (including profit) must be covered by total sales over the long term.
- Individual items might not always cover their "full share" of costs in a given period, but their price should at least cover direct costs.
- A "fair price" can vary among suppliers for the same, or similar, items; both are fair to the buyer, possibly coexisting.
- A price set by a monopoly or through seller collusion is not automatically unfair or excessive.
- A prevailing price might not always be deemed fair, especially in environments such as black or gray markets, where illegal or unregulated transactions take place. Furthermore, markets dominated by a single supplier can lead to prices that do not reflect competitive fairness, often disadvantaging consumers and stifling market efficiency.
- Supply managers need to assess "fair price" considering a range of factors.
- A fair price calculation is dependent on historical data and a deep understanding of the production processes.
Factors Affecting Fair Price
- Past experience and production process knowledge are important in assessing fair prices.
- Production costs are key.
- Costs of storage, transportation, delivery, and other logistics must also be considered.
- Accuracy in evaluating fair price requires thorough knowledge of production processes, associated costs, and logistics costs like storage, transportation, delivery, and other relevant costs.
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Description
This quiz explores the concept of fair pricing in supply management. It covers factors that influence fair pricing, supplier profit considerations, and market dynamics that can affect perceived fairness. Test your knowledge on how fair prices are determined and the implications for supply managers.
