ABSTRACT
Prices are guided and influenced by market conditions, so the achievement of company profit objectives often necessitates compromise over the amount that can be realised. Price is not necessarily the most important factor in the buying decision. For the seller, price determines the amount of profit, so pricing decisions should be approached in a disciplined manner, for it provides revenue, while the other marketing mix elements represent costs. Marketing writers criticise cost-orientated approaches to pricing, as costs do not necessarily reflect market conditions at least in the longer term. Companies can design marketing strategies that put costs into the perspective of a long-range strategic approach. When companies attempt to plot a demand schedule, or demand curve, for a product, they must consider elasticity of demand. This describes the sensitivity of consumers to changes in price. A product has elastic demand when small price changes greatly affect levels of demand. Inelastic demand is relatively insensitive to price changes.
