The ideal purpose of business or being an entrepreneur is to generate income and the most direct method of doing so is through sales. However, the market is not always friendly as one would prefer or easy to predict with regards to supply chain fluctuations. Several factors common in selling include competition, quality and availability of the product and these can often impact on sales. All the same, the principle of pricing largely remains the most significant one under such conditions. For example: As can be seen in graph below, though the first iPhone was launched in 2007 for a price of $500, the subsequent models like iPhone 15 Pro Max which was available for sale in September_2023 for between $1200 to $1600, the overall iPhone price has successively risen,but iPhone till date has been able to success which always raises a questing as to how iPhone and other companies out there fix the right iPhone.

1. Calculating Production cost 

Every business or person thinks about the cost of manufacturing of the products. These are the time incurred, wages of the employees and cost of materials used and the costs of the technologies employed. While labor costs involves the total expenditure incurred on wages of the workers employed in the production of the product, raw materials and technologies on the other hand involves the total cost of the basic inputs or ingredients or enhancing, maintaining and utilizing the product. Once the cost of the production of a certain product has been established, the data is used in setting the price of the product depending on the intended rates of profit.

2. Understanding the state of the economy 

The state of the economy may also prove to have an even bigger impact on competition and thus product pricing. For instance, in situations where labor, raw materials as well as costs of production increase because of inflation, then prices must be increased as well to maintain profit margins. Exchange rates also have impact on the price of products for business men and people that deal with business across the globe. For instance, say a firm acquired some inputs from overseas and the local currency lose value, it means that the amount of inputs that can be bought would reduce due to change in the exchange rate. In a recession people spend less money, hence firms may seek to cut down their prices or give customer a discount so that they can continue bringing their business.

3. Assessing market demands 

Market demands,in this context, means the extent to which the consumers require the particular product. When the demand is high the companies are likely to offer their products at a higher price, this is in contrast to when demand is low, where the companies may decide to offer their products at comparatively low prices. For example, in the current COVID-19 pandemic, there was the need for hand sanitizers, which saw its price go up in the process. Apart from demand, an organization measures how its products are performing in the market by a concept that is referred to as price elasticity. A product is regarded as price inelastic if consumer are even willing to pay more for the product and hence, price changes will not threaten sales. If a specific product is sensitive to the changes that particular prices has on its sales figures, it is elastic.

4. Competition 
The market is always saturated with products and very often they are similar in terms of outlook and taste. If something is proprietary, the company may set higher prices; but if the competitor is offering the similar, it cannot set high prices.
product at the cheapest possible price in the market then various businesses may be forced to follow the same strategy in other to be competitive.

In general, according to one of the most prominent Americans businessman and investor – warren buffet the unchallenged leader to evaluate a business is to consider pricing power. Even as you set the right price for your guarantee profits which should be noted as the most critical decision, equal importance should be given to the understanding that in order for the price of the product to meet the market demand, the product has to stand the market flaws.