Answer:
Factors affecting pricing decision are as follows : (i) Product Cost The total cost of product includes production, selling and distribution costs. The cost sets the minimum level or floor price for a product. Price must be decided by adding a profit margin to the total cost of the product. (ii) The Utility and Demand It is necessary to anticipate the utility and demand of a product while fixing the price, as if a product is offering higher utility, one can easily charge high price. Whereas, if utility is low, one cannot charge high price for such products. (iii) Extent of Competition in the Market The price of a product can be set up to the higher limit, if the extent of competition is low in the market and vice-versa. (iv) Pricing Objectives If the objective of the firm is to maximise sales, price will be set at a lower level. Whereas, if the firm's objective is profit maximisation, price will be set at a higher level. (v) Marketing Methods Used The price of the product also gets affected by various techniques and methods of marketing used to promote the products. If the company is using intensive advertising to promote the sale of product, then it will charge high price.
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