Question

For your initial comment post two paragraphs. 1. The first on the concept of break-evern and what notions a manager should be aware of when finding the break-even quantity. 2. Next, post a comment on the concept of market equilibrium and how prices are determined in a market.

Answer 1

1) break even point is a very essential concept for an economist and a business person because it is the point where the cost of production and total revenue are exactly equal to each other which depicts that the firm is in a neutral position and neither making profit nor any losses. it shows a state where a firm has to decide whether it should expand production or not so its also known as cost-volume-profit analysis and it helps study the relationship between loss, profit, revenue and cost of a firm.

as the breakeven point helps to understand a firm profit loss and the cost situations it is very important fir a firm to be wise while taking quantity decissions. any sells above the break even point will bring the firm profit while any quantity less than it will bring the firm losses. in the operation management the break even point shows how many quantity must be sold to equalise comapanys profit on sales and its fixed cost. it helps to determine what should be the price of each product in the market. if the break even point is higher than the no. of units of a product one can sell then it simply means price should be increased and vice versa.

2) the market equilibrium depends on the demand and supply of the respective product in the market. the equilibrium will be at the point where demand for the product equals the supply of the product and the price and quantity will be determined there. if demand increases more than supply then price also increases and if supply increases more than demand or we can say there is less demand in the market, price will decrease. so market equilibrium totally depends in the demand and supply situation in the market.