Pricing of a product is an important and effective competitive weapon in marketing which depends upon various factors. Explain any 4 such factors.

Dear student, 

​Price refers to the amount of money that must be paid in order to obtain the product. The following are the various factors that affect the price of a product:

1. Cost of production: The cost of production sets the basic minimum price that the firm would charge for the product. Herein, the cost includes fixed cost, variable cost as well as semi-variable cost. 

2. Price elasticity of demand: If the demand for the product has high price elasticity then the firm cannot charge a high price. This is because an increase in price would imply a large fall in demand. 

3. Degree of competition: If there is high competition in the market the firm cannot raise the price even slightly. 

4. Government regulations: Sometimes the government intervenes in the determination of price of a product with the objective of welfare of the society. 

5. Objectives of pricing: While determining the price of a product a firm must keep in mind its objectives of pricing.  Some of the objectives can be acquiring greater market share, surviving competition, quality leadership.

6. Methods of marketing used: The determination of price also depends on the methods of marketing that the firm uses. For example, if a firm incurs a huge cost on advertising it would charge a high price.   

Regards