ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The price you set can also send a ‘signal” to customers. A low price suggests low quality. On the other hand, if you sell handmade products, higher prices can help convince customers that they are buying something special.

Detailed explanation-2: -Pricing, as the term is used in economics and finance, is the act of establishing a value for a product or service. In other words, pricing occurs when a business decides how much a customer must pay for a product or service.

Detailed explanation-3: -Instead of basing prices on what the customer is willing to pay, businesses set prices by determining the cost of production and their ideal profit margin. For example, if a product costs $100 to make and a company’s target margin is 15%, then the product will sell for $115.

Detailed explanation-4: -Five main objectives of pricing are: (i) Achieving a Target Return on Investments (ii) Price Stability (iii) Achieving Market Share (iv) Prevention of Competition and (v) Increased Profits! Before determining the price of the product, targets of pricing should be clearly stated.