Price mix refers to the activities relating to the price to be charged for the product. Consumers are very sensitive to price changes. A minor change in price may affect the demand for the product and profitability of the producer. Price is the only lament that produces revenue and therefore, it is most important tool of marketing management. 

Following are the factors that affect fixation of price of product : 

(a) Objectives of setting the price. According to different objectives like to capture a large market share, increase in profits, and increase in calls, introducing a new product, price should be set. 

(b) Utility and demand of the product. The utility is the satisfaction derived by the customer from the consumption of a product. A buyer is ready to pay up to the point where the utility from the product is at least equal to the price he is paying for it. Thus, the firm should take into consideration the utility the product is providing to the customer. Further, the elasticity of demand also affects the pricing decision. If the elasticity is more, a slight increase in the prices can have a large decrease in the quantity demanded whereas if the demand of a product is inelastic, the firm is in a position to fix higher prices too. 

(c) Cost of production and other overheads. A simple formula to tax the price is total costs in addition to desired profit. No firm likes to sell its product below the cost of the product. The total cost helps the firm to set the minimum limit of the price. 

(d) Extent of competition in the market. If there is lesser degree of competition, price will tend to be higher and vice-versa. 

(e) Government and legal regulations. If a particular commodity is declared as essential commodity and its prices are regulated, then its firm cannot charge a price on a higher side.