The Market and Demand

While costs set the lower limit of prices, the demand and market set the upper limit. Consumer and industrial buyers both balance the price of service or product against the benefits of owning it. Therefore, before setting prices, the marketer has to understand the relationship between demand and price for its product. In this section, we described how the price-demand relationship varies for different types of markets and how buyer perceptions of price affect the pricing decision. Then we discuss methods for measuring the price-demand relationship.