Question:
Explain the following factors affecting the price determination of a product :
(i) Government and legal regulations
(ii) Marketing methods used
Explain the following factors affecting the price determination of a product :
(i) Government and legal regulations
(ii) Marketing methods used
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Government rules can control prices of essential goods. The use of distribution, salesmen, advertising and sales promotion can give a firm freedom to price higher.
Updated On: Oct 26, 2026
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Solution and Explanation
Step 1: Introduction:
The price of a product depends on many factors, some inside the firm and some outside it.
Two of them are explained below.
Step 2: Factor (i): Government and legal regulations:
The government wants to protect the public from unfair price practices.
So it can step in and control the prices of goods.
It may declare a product as an essential commodity and fix or limit its price.
A firm must then keep its price within the legal limit, even if it could charge more in the market.
Step 3: Factor (ii): Marketing methods used:
Pricing is also shaped by other elements of marketing such as the distribution system, the quality of salesmen, the amount and quality of advertising, sales promotion and the type of packaging.
If a firm uses strong and unique methods in these areas, it gains the freedom to fix a price higher than its rivals.
If its methods are weak, it may have to keep a low price to attract buyers.
Final Answer:
Government rules limit the price that can be fixed, while the marketing methods used decide how much freedom a firm has in pricing its product.
The price of a product depends on many factors, some inside the firm and some outside it.
Two of them are explained below.
Step 2: Factor (i): Government and legal regulations:
The government wants to protect the public from unfair price practices.
So it can step in and control the prices of goods.
It may declare a product as an essential commodity and fix or limit its price.
A firm must then keep its price within the legal limit, even if it could charge more in the market.
Step 3: Factor (ii): Marketing methods used:
Pricing is also shaped by other elements of marketing such as the distribution system, the quality of salesmen, the amount and quality of advertising, sales promotion and the type of packaging.
If a firm uses strong and unique methods in these areas, it gains the freedom to fix a price higher than its rivals.
If its methods are weak, it may have to keep a low price to attract buyers.
Final Answer:
Government rules limit the price that can be fixed, while the marketing methods used decide how much freedom a firm has in pricing its product.
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