Question

What are the factors affecting the determination of the price of a product or service?

विकल्प

• Cost of the product

• Demand for the Product:

• Degree of Competition in the Market

• All of the above

Answer 1

All of the above

Explanation - 

The following are the elements that influence a product's or service's price determination.

1. Product Cost: The cost of the product is a major factor in determining the price. It includes the costs of manufacturing, distributing, and selling the goods. The cost of a product is divided into three categories: fixed cost, variable cost, and semi variable cost. Fixed costs are those that do not change with the amount of output produced.
2. Product Demand: When calculating the price, a company must also consider the product's demand. The elasticity of demand is crucial in this case. The proportionate change in demand owing to a given proportionate change in price is referred to as elasticity of demand. The demand is said to be elastic if it fluctuates by a bigger proportion due to a minor proportionate change in price. Demand is said to be elastic if a minor increase (or decrease) in price results in a relatively significant decrease (or increase). In this situation, the company cannot charge a higher price because it would cause a significant drop in demand.
3. Degree of Competition in the Market: Generally, higher the competition in the market, the lower is the price that a firm. can charge for its product. This is because in case of high competition, if a firm attempts to charge a high price, it would lose its customers to the competitors. On the other hand, if a firm faces very little competition for its product then it has the freedom of charging a higher price