Which of the following is a factor affecting price?

• A. Advertising
• B. Costs
• C. Brand awareness
• D. Seasonality

Answer: (B)

Prices are determined in part by what it costs to produce or acquire the product. To make a profit, the price must cover total unit costs and leave a margin. If costs rise, a business may raise the price to protect profitability or look for ways to cut costs; if costs fall, there’s more flexibility to lower the price or improve margins. Advertising, brand awareness, and seasonality influence demand and how much customers are willing to pay, but they don’t set the price as directly as costs do. So the direct factor driving price in this context is the cost of production.