Pricing decision

Price may be defined as the exchange of goods or services in terms of money. Without price firm can survive in the society. If money is not there exchange of goods can be undertaken, but without price, i.e. there is no exchange value of a product or service agreed upon in a market transaction is the key factor which affects the sake operations.

To a manufacturer, price represents quantity of money (or goods and services in a barter trade) received by the firm or seller. To a customer, it represents sacrifice and hence his perception of the value of the product. Conceptually, it is:

Price=quantity of money received by the seller / quantity of goods and services rendered received by the buyer

In this equation both the numerator and the denominator are important for price decisions.

Price of a product or service is what the seller feels it worth, in terms of money to buyer.