When consumers decide on a purchase, price is one of the most influential fac-tors. How much is it？ is often the first question a consumer will ask. He may beattracted by the functions, or quality of a product, but will probably turn away if hefeels the price is unreasonably high or he cannot afford it. Ironically, low price strate-gy may not always work. First, lowered prices mean less or no profits. Besides, toolow a price may make a customer hesitate because he may be suspicious of the qualityof the product. Therefore, product pricing should be fully integrated into the overallmarketing strategy.
When you ask some consumers Who sets the price？, many would answer withno hesitation, Of course the seller sets the price. But actually, many forces inter-act in price setting. First of all, in a market economy, buyers play a greater role inprice setting than most people believe. If the sellers are given the liberty of settingprices at their will, they will certainly charge the highest price possible, but that willscare away most, if not all, of the buyers. As a result, the sellers will have to cut theprice to the point that it is high enough for them to make a profit but low enough toattract a sufficient number of buyers. So, by buying or not buying a product the buy-ers can exercise great influence on the price setting process. Secondly, supply and de-mand also interact in price setting in a market economy. When the supply of a prod-uct exceeds the demand for it, the price will go down, and vice versa. According to the economic theory of supply and demand, price is set where supply meets demand, and this price is referred to as the equilibrium price.