Chapter 11.2, Problem 3R

To determine

To state: The factors that must be considered before setting a price.

Answer to Problem 3R

Other than profit, there are several other factors that affect the price namely: cost, customers, location, competitors, etc.

Explanation of Solution

The following is the list of all the factors other than the profit that must be considered before setting a price:

1. Cost- It is an important factor. One must ensure that the price set is capable enough to cover all the costs that are incurred for developing a product.
2. Customers- Customers are the backbone of any business. Before setting the price, customers and their wants must be kept in mind as to provide them full satisfaction from the product.
3. Location- Once you understand your potential customer, the next step is to locate the appropriate place where you need to place your business.

Economics Concept Introduction

Introduction: Pricing is an important aspect of a product. It is determined by the supply and demand forces. A lot of expenses and other factors are considered before setting a price so as to cover all the expenses and makes some profit on the sale.