Question

Why are price changes more costly to make compared to quantity changes? How important are signals in the market in deciding price and quantity changes? What reliable signals is this firm getting?

Answer 1

It can actually be mentioned that with the dynamics in the market and the psychology in the market the price changes can be considered more costly than the quantity changes in for instance consider the case of a show of 150 g priced at two dollarsAnd if the quantity is reduced to 125 g at two dollars it would be difficult on the customer might not actually noticed it and he would be happy to pay two dollars for that particular so but if the price actually increases for 150 g up to $2.25 Then the customer would actually be unsatisfied and might shift to a substitute or 125 g soap at two dollars and the amount of substitutes in the market or elasticity  of demand play a major role in deciding to what extent you can change the price on to what extent we can change the quantity etc.The reliable signals can be considered as the past data on the amount of new competitor is entering the market with different price structure and the serious changes in your current company which indicate various factors such as cross price elasticities etc a firm is actually getting