Pricing during Stiff Competition and Trade Depression
During stiff competition, products may be sold at a price below the total cost. In such circumstances, the price should be fixed on the basis of marginal cost in such a manner so as to cover the marginal cost and contribute something towards the fixed expenses. During trade depression also, products may be sold at a price below the total cost. There is a fall in the price as a result of depression. The prices can be safely reduced to an extent which covers the variable cost and contributes something towards the fixed cost.
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