Factors Affecting Price Determination:

1. Product Cost:

One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.

2. Demand: 

The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the rm is in a better position to x higher prices.

3. Competition:

Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.

4. Government and Legal Regulations:

In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act.,

e.g. Medicines.

5. Pricing Objectives: 

Another important factor affecting the fixation of price of a product is pricing objectives,

e.g. maximisation of profit, market share, etc.