What factors affect the price limit?

The primary factors that affect the price price of the company are part of the equation known as the price ceiling index. This formula determines the best balance between three factors: inflation, expected savings on efficiency compared to comparable companies and factors outside the company control. The purpose of the price determined from this information is to protect the customer from crowding and at the same time it is economically feasible for a service company to remain in business.

Generally know as a PCI, the price limits index determines the highest possible change in price allowed based on a combination of three factors. Each factor in the equation has a corresponding letter. There is an exogenous factor (Z), inflation factor (I) and offset productivity (x). These combined elements provide a comprehensive view of the company's services in comparison with the economy as a whole and a comparable sector.

The exogenous factor concerns the elements of the non -control of the company that can affect its business ability. This may includeLesters such as economic recession or natural disaster. It can also be an unexpected local or world event that the company could not predict. This factor is one of the most variables of three. If the company faces inevitable failure, the company will have to increase prices, but how much it depends on the nature of the problem.

Inflation factor is determined on the basis of current inflation data in the economy. The primary basis for comparison is the average rate charged by similar companies on the same market. It takes into account both the average society and the current value of the country's currency. If it is above average, then the prices will drop; If it falls under the combined factors, the prices will increase.

Offset productivity measure how well Company is able to save money with initiatives to increase efficiency. It also measures the success of this effort in comparison with the success of similar companies on the market. Usually considers as a continuedEmployment for improvement and current results. If efficiency is higher, the price of services must drop. The opposite should happen if it is lower.

The

price ceiling regulation was first conceived in the UK in the 80's. Stephen Littleleld, the economist of the British cash desk, invented a method for management of prices of private companies. It was a deviation from previous concepts in which income was the basis for determining the price.