Factors affecting pricing decision are :
`(i)` Product cost :The total cost of product includes production, selling and distribution costs. The cost sets the minimum level or floor price for a product.
Costs can be broadly divided into three categories :
`(a)` Fixed costs, which do not vary with change in production.
`(b)` Variable cost, which vary at all levels of production.
`(c )` Semi-variable costs, which vary with production, but not in direct proportion with it.
Price must be decided by adding a profit margin to the average cost of the product.
`(ii)` The utility and demand: It is necessary to anticipate the utility and demand of a product, while fixing the price, as if a product is offering higher utility, one can easily charge high price. Whereas, if utility is low, one cannot charge high price for such products.
`(iii)` Extent of competition in the market :The price of a product can be set upto the higher limit, if the extent of competition is low in the market, and vice-versa.
