# Pricing

One basic element of the marketing mix is pricing. A "Price" for a product or service refers to the amount of money needed to acquire that product or service. In a competitive business environment, Marketing Managers strive to establish pricing policies for goods or services to meet certain objectives, such as:

i) To enable the firm to earn a fair percentage of profit.

ii) To meet or stay ahead of competition.

iii) To maintain or increase the firm's share of the market and

iv) To stabilize its prices.

Economic theory assumes that a firm will set prices that will maximize profits. To achieve this goal, prices will be set where the quantity of a product demanded at a certain price is equal to the quantity that suppliers that suppliers are willing to supply at that price. This demand and supply relationship is shown by Demand and Supply curves. The "Demand Curve" shows the amount of a product demanded at different prices. The "Supply Curve" shows the quantity of goods offered for sale at various prices. The point at which the quantity demanded is equal to the quantity supplied is called the "Equilibrium Prices". It is shown in the diagram by the point "P".

Demand is described as elastic or inelastic. When buyers will buy more of certain goods at low prices than at high prices, the demand is said to be "Elastic". For other goods, demand is inelastic, means increase or decrease in prices will bring about relatively little or no change in demand.

## Pricing Policy

Different methods are used by the firms in pricing their products. Some firms base their pricing on costs, while others chalk out their pricing policies considering competitive conditions in the market.

Thus, different firms use different methods of pricing depending upon their own concept of market situations and the operational convenience, price determination is an important function, as this directly affects the earnings of the concerns.

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