Since economy boom is an external factor how does it affect a company pricing decision?

The economic boom is a period of rapid economic growth, characterized by increased production, consumption, and investment. During an economic boom, several factors come into play that can influence a company's pricing decisions. Here's how it typically occurs:

1. Increased consumer demand: During an economic boom, consumers tend to have more disposable income and confidence in the economy. This leads to an increase in demand for products and services. As a result, companies can adjust their pricing strategy by slightly increasing prices to capture the increased demand and maximize their profits.

2. Supply and demand dynamics: With the increased demand during an economic boom, the supply of goods and services may struggle to keep up. This imbalance drives prices upward as companies can charge higher prices due to the limited availability of their products or services. In such cases, companies may be able to increase their prices to not only take advantage of the increased demand but also cover any additional costs associated with increased production or distribution.

3. Profit maximization: An economic boom often provides companies with profit opportunities as consumer spending rises. To maximize profits, companies may adjust their pricing to find the balance between maximizing revenue and maintaining a competitive edge. For example, if the market becomes more price-sensitive during a boom, companies might be hesitant to raise prices too much, fearing that their customers will seek cheaper alternatives. Therefore, pricing decisions need to consider both the market conditions and the company's position in the market.

It's important to note that pricing decisions during an economic boom can vary across industries and individual companies, as they depend on factors such as market competition, product differentiation, and the degree of price elasticity in demand. Therefore, each company's pricing strategy would need to be tailored to its specific circumstances.