1. What are the key factors that should be considered in fair pricing?
The factors include:
Demand: This refers to the amount or quantity of goods that consumers are willing and able to purchase at various prices during a given time. When this is considered in relation with price, it is called the demand curve.
Supply: The fundamental economic concept that refers to the amount of a given product or services that suppliers are willing to offer consumers at a given price level, at a given period.
Competition: This refers to the contest between organizations that provide similar products or services or that target the same audience of consumers. The competition might be to convert or retain customers, increase revenue and gain more market share.
Cost of Production: This refers to all of the expenses associated with or incurred by a business in the process of making a product or offering their services. It is also called production cost or cost price.
Marketing methods: This refers to a business’s approach to how it will reach its desired new customers. It is a long-term plan for achieving the company’s goals by understanding the needs of customers and creating a distinct and sustainable competitive advantage. It involves determining who your customers are and what channels to use to reach them.
Market prices: This refers to the current price at which an asset or service can be bought or sold. It is the price at which quantity supplied equals quantity demanded, and it is determined by the forces of demand and supply.
Others factors include:
Circumstances
Government rules and regulators
2. How can unfair pricing situations arise? Can you relate any of the situations you have come up with to the case?
2a. Unfair pricing situations can arise as a result of the following:
Monopoly: This refers to a market without competition, where a specific person or entity is the only supplier of a particular product or service.
Other causes of unfair pricing situations include:
Collusion among major marketers
Special needs
Ignorance of buyer
Special Circumstances
2b. My experience with an unfair pricing situation was the astronomical increase in prices of gloves and face masks being used in hospitals during the COVID-19 Outbreak in 2020-2021. The dealers took advantage of the increased demand brought about by the pandemic and increased prices by up to 1,500%. This was very unfair and in fact very callous given that not using these Personal Protective Equipment (PPEs) will expose healthcare professionals to the infectious agent and could possibly lead to death. Nonetheless, hospitals had to buy the materials in order to continue offering services to the public.
3. In your opinion, should pricing be based on the costs only?
No, the price of a good or service goes beyond just the cost of its production. Other things to be considered include market value, demand and supply forces, prevailing market prices, circumstances like inflation, scarcity of raw materials, need for profit for the seller/producer etc. Considering these factors either singly or in combination will help determine the ‘real value’ (appropriate price) of the product, good or service.
#MEMBA11
