Discuss the main factors affecting product pricing in the UK?

The Oxford English dictionary defines price as “ a value that will purchase a definite quantity, weight, or other measure of a good or service”. Simply put, the price of an object represents the overall demand for that product at a specific time. However, every firm had a different ideology about price and they way they set price.
One of these main factors that affect price is the actual objective of the firm. Traditional theory suggests that firms will charge a profit-maximizing price where price is determined when marginal cost equals marginal revenue.
They operate to seek a maximum return on the investment and costs they have input. The diagram below shows how firms produce at the profit maximisation point (MC=MR) and what costs they incur (point C). It also shows that most firms that follow a profit maximizing strategy incur a profit (price is greater than cost)
.

Figure 1 From Wikipedia.org
Figure 1 From Wikipedia.org

Although profit maximization looks like the most viable business objective that a firm can adopt, the majority of firms tend not to follow it. Research done by economist Shipley in 1981 states that “of 728 firms studied only 15.9% are true profit maximizers” (Sloman, Wride (2009). Economics. 7th ed. London: Pearson Education. p7.). Baumol in 1959 and Williamson in 1963 stated that this was because managers were more focused on sales revenue since their salaries were matched with how much was actually sold. (“Economics” John Sloman, Alison Wride). The Baumol theory states that firms will look to maximize its total revenue in the long run subject to its profit constraint (the minimum acceptable profit range). This aspect is shown in the diagram below.

Figure 2 Graph taken from slideshare.ne

. Even though this graph deals mainly with profits, its purpose is to illustrate the main