Explain the effects of low price-guarantee on the price

1) Low price guarantee is when a producer or a seller offers a price for a product that can match or beat any lower price of that product in the market. The producer guarantees to cover the gap if the consumer finds a lower price.

So such an offer or policy has a huge impact on the price of the product and the price needs to be the lowest in the market so that the consumer of that product cannot find the product at a price lower than the offered price. Else there image of that seller offering lowest price will be at stake. So the only option he has is to offer the lowest price if such an offer has been made. But this helps to attract a number of customers in the market.

2) If group of sellers form a cartel, then they should set the quantity and price of the goods or services that has been set by the monopolist. That cartel should sell the monopoly quantity and price, that is where the marginal cost is equal to the marginal revenue. That level of quantity should be sold where marginal cost is same as marginal revenue.

3) Discriminatory monopoly is when the firm charges different prices for the same product or service to different consumers.

A monopoly firm can charge different prices to different consumers:

• if the market for the product of the monopolist firm is an imperfect market.
• Also the monopolist firm can have discriminatory monopoly if the firm is able to create separate markets for the product.
• Also the firm needs to avoid resale of the product for having discriminatory monopoly.