BUISNESS : Pricing Theory
Document Summary
The pricing theory is a fundamental concept in business as it is closely related to profit and profitability. It helps companies decide how much to charge for goods and services in order to maximize their profits. The pricing theory states that if the price is set too high then the demand will drop and profits will suffer, while if the price is set too low, then profits will likewise diminish. The goal is therefore to achieve the right balance between price and demand. The pricing theory is based on various factors, such as the company"s cost structure and overall market conditions. Companies must also determine what the competitors" prices are, as well as the various sensitivities of buyers in order to determine the best pricing strategy. Furthermore, a company may choose to use promotions or discounts as part of their pricing strategy. All of this information must be taken into consideration when using the pricing theory.
