Commercial Applications
Which of the following is/are correct statement(s)?
Statement 1: Parity pricing is an appropriate strategy when there is little competition and product differentiation.
Statement 2: Cost-plus pricing is used when a firm wants to cover its costs and achieve a reasonable profit margin.
- Only Statement 1 is correct.
- Only Statement 2 is correct.
- Both statements are correct.
- Both statements are incorrect.
Marketing Mix
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Answer
Only Statement 2 is correct.
Reason — Statement 1 is incorrect because parity pricing is appropriate where competition is very severe and competitive products are homogeneous (not where there is little competition and differentiation). Statement 2 is correct because cost-plus pricing ensures full coverage of costs and helps in achieving a reasonable return on capital employed.
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