How do businesses make pricing decisions? The answer is not an easy one, as you have probably realized. Constant changes in the marketplace force businesses to review their pricing decisions, frequently. Four key factors that must be considered when reviewing and establishing prices are: costs and expenses, supply and demand, consumer perceptions, and competition. Most price planning begins with an analysis of cost and expenses, many of which are related to current market conditions. The cost of raw materials may increase a manufacturer’s cost to make an item

Key Terms:
Break-even point
Demand elasticity
Law of diminishing marginal utility
Price fixing
Price discrimination
Unit pricing
Loss leader

*List the four market factors that affect price planning
*Analyze demand elasticity and supply and demand theory
*Explain how government regulations affect price planning