Product costs set a floor to a product's price;consumer perceptions of the product's value set the ceiling.

Question

Quizplus · Accepted Answer

This statement is true. The costs of producing a product, including direct materials, labor, and overhead costs, set a minimum price that the company must charge to cover its costs and achieve a profit. On the other hand, consumers' willingness to pay for a product, based on their perceived value, sets the maximum or ceiling price that the company can charge. If the perceived value of the product is high, the company can charge a higher price, but if consumers do not see enough value in the product, they may not be willing to pay a high price and the company must lower its price accordingly.

Product Costs Set a Floor to a Product's Price;consumer Perceptions