Which factor does not affect the pricing decision of a firm?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Social strength of the company
Option (1) Product cost — A factor affecting price (Incorrect). Cost sets the lower limit of the price, because a firm must recover its costs over time.
Option (2) Social strength of the company — Not a factor affecting price (Correct). No such factor exists. The factors of price are product cost, utility and demand, extent of competition, government and legal regulations, pricing objectives, and the marketing methods used.
Option (3) Demand and utility — A factor affecting price (Incorrect). They set the upper limit, the most a buyer is prepared to pay.
Option (4) Market competition — A factor affecting price (Incorrect). It decides where the price settles between the lower and the upper limit.
NCERT (2026-27 Edition): “Factors affecting Price Determination There are number of factors which affect the fixation of the price of a product. Some of the important factors in this regard are discussed as below: 1. Product cost: One of the most important factor affecting price of a product or service is its cost. …” “2. The Utility and Demand: While the product costs set the lower limits of the price, the utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. …” “3. Extent of Competition in the Market: Between the lower limit and the upper limit where would the price settle down? This is affected by the nature and the degree of competition. …” |