Price Formation
By konstantin otto c. botschkowski, Sat Dec 10th

Price Formation The price is formed at the market. Increasingthe price, it lowers the sale volume. Increasing the publicity,it increases the sale volume. Increasing the product quality[investing in design], it increases the sale volume. In thismodel of tendencies we have variables: price, sale volume,publicity and product quality. Are missing variables; profitrelative to the sale amount, profit relative to the employedcapital and employed capital. As profit is here understood thisvariable under several focuses [sees below]. In this simplemodel, of tendencies, we have seven variables. Cost consists of:Production cost, bureaucratic costs, depreciation of the project[design], insurance cost, commercial costs and transport cost.01-00Production cost 01-01Material and components 01-02Labor01-03Energy 01-04 Depreciation of the industrial equipment 01-05Rent of the industrial space 01-06 Allotment Bureaucratic costsTerritorial tax 01-07Insurance costs [business risk] Againstsinister Against commercial risk 02-00 Depreciation of theproject [design] of the product 03-00 Cost of the transportTransport Insurance Taxes [trading] 04-00 Commercial costsPublicity Commissions 05-00 Profit consist in: 05-01 Directtaxes Excise ect... 05-02 Profit of the company [gross]Operational profit Not operational profit [positive or negative]06-00 Company profit income tax******************************************************** TaxesDirect taxes Company income tax Employees Income taxShareholders Income tax Tax built-in the expenses of consumptionof employees and shareholders******************************************************** Toanalyze the cost and the operational profit, in viable period,we needs

to appeal to a fast software, for instance thatdescribed in: http://oz.pro.br/w/ . For analysis of the notoperational profit we needs to appeal to the specific softwareof marketing. This software creates a mathematical model,starting from the statistics of the four variables: w - price; x- sale volume; y - publicity; z - quality And it creates alineal model: Aw+Bx+Cy+Dz=0, from the sampling of four up to tencompetitors, of the same market. For instance: manufacturers ofsoft drinks, of refrigerators, of televisions, ... Eachcalculation is made with four competitors, to obtain fourcoefficients [A, B, C, D]. In the case of 'n' [more than four]competitors, forming 'm' goops of four, it obtain 'm' games ofcoefficients and a game of an average of these. This linealmodel is exact only for small variations. Larger accuracyobtains the no lineal model: Aw+Bx+CA y^2+CBy+Dz=0. The modelsare less exact as larger variation. But better a model lessexact than any model. With this model the software defines thevariables: profit on sale amount, profit on employed capital,employed capital and it optimizes profit on employed capital.********************************************************** Thetaxes are analyzed to determine the integral participation ofaggregate amount in the state economy. Coffee-Breakhttp://oz.pro.br/wc/ Download http://oz.pro.br/coffee/coffee.zipKonstantin Otto, June, 2005 oz@oz.pro.br

About the author:Professor of mathematics' philosophy retired I write articles infour languages, since 1946. More of them are specific.oz@oz.pro.br