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Business Studies for Secondary Schools
Labour (dyeing and printing): TShs Importance of price
3,000 per meter Price is fundamental as it is the only mix
Overhead costs (stall rent, storage): element that generates revenue for the
business. The importance of price in a
TShs 1,000 per meter
business is explained as follows:
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Desired profit margin: 40%
Price is considered the most flexible
Calculate the selling price of one marketing mix element: For marketers,
meter of Kitenge fabric using the price is the most adjustable of all marketing
cost-based pricing method. decisions. Unlike product and distribution
decisions, which can take months or years
2. Christina is really a good cook, to change, or some forms of promotion
and she runs a small food vending which can be time-consuming to alter
outlet. Her aunt is encouraging her (for example, television advertisements),
to sell rice and beans plate using prices can be changed rapidly depending
a customer-based pricing method on the economic conditions or market
to determine the price of a plate of forces.
rice and beans.
Price is also an indicator of the quality of
The following information was a product: This is because people use price
obtained after market research: as a criterion for assessing the quality of
a product. They tend to associate a high
Customers are willing to pay
between TShs 1,000 and TShs 2,500 price with high quality and a low price
for a plate. with low quality.
Nearby food vendors sell a similar Price is an important part of sales
plate for around TShs 2,000. promotion: This creates a first impression,
The costs associated with preparing and shapes customers’ perception of a
a plate of rice and beans are product the moment they see or learn
identified as follows: its price. Additionally, price adjustments
Ingredients (rice, beans, cooking play a key role in sales promotions,
oil, spices): TShs 500 per plate influencing purchasing decisions and
Labour: TShs 400 per plate attracting customers. A low price may
Overhead costs (stall fee, be set for the short term to stimulate
charcoal): TShs 300 per plate customers’ interest in the product.
Using the perceived-value pricing Therefore, the price of a product can be
a major determinant of market demand
method, determine a suitable for the item. That is, the higher the price,
selling price for a plate of rice and the lower the interest in it or the quantity
beans. Justify your price.
demanded, and the lower the price, the
Student’s Book Form Three 10
