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Question
Explain five factors that should be taken into consideration while determining the price of a product or service.
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Solution
(i) Cost of Production: Cost of production/service is the main component of price. No company can sell its product or services at less than the cost of production. Before price fixation, it is necessary to compile data relating to the cost of production and keep that in mind.
(ii) Demand for Product: Intensive study of demand for products and services in the market be undertaken before price fixation. If demand is relatively more than supply, a higher price can be fixed.
(iii) Price of Competing Firms: It is necessary to take into consideration the prices of the products of the competing firms before fixing the price. In the case of cut-throat competition prices are required to be kept low.
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