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Factors Affecting Pricing Decisions

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What factors must a firm consider when deciding to raise or lower its price?

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Solution Summary

This solution lists the factors that should be taken into account before making any change in prices.

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Changing prices is a very sensitive issue. Various factors should be taken into account before jumping to any change (lower/higher) in price.

1. Customers: It is necessary to know the size of market and how buyers will react to price changes. It is necessary to know whether customers will buy the product at the proposed prices or they will switch over to other substitutes.

2. Availability of substitutes: Any increase in price may push the customers to switch over to closer substitutes. Any ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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