Jonathan is planning on setting up a small-scale guitar manufacturing company.Jonathan isn't well versed in economics,so he doesn't understand the concept of supply and demand very well.What pricing strategy must Jonathan adopt?
A)Skimming pricing
B)Prestige pricing
C)Psychological pricing
D)Cost-based pricing

Question

Quizplus · Accepted Answer

Cost-based pricing would be the best choice for Jonathan since he is not well versed in economics and may not understand the market demand for his product. With cost-based pricing, he determines the cost of producing the guitar and adds a markup to set the price. This way, he ensures that he covers his costs and makes a profit. It is a straightforward and safe pricing strategy for a new business. Skimming pricing, prestige pricing, and psychological pricing may be more suitable for established businesses with well-known brands and customer bases.

Jonathan Is Planning on Setting Up a Small-Scale Guitar Manufacturing