What determines price in the market

In classical economics, price was determined by supply and demand. This, however, assumed that there were many buyers and many sellers, that buyers were fully informed of the supply available and were free to come into the market or go out of it at will. It assumed what economists call a state of perfect competition. Actually, it is doubtful whether Such a state ever existed. Certainly, we do not have it today. Economists today refer to our economy as monopolistic competition, oligopoly, administered or controlled competition, and other terms, all of which indicate that we do not have a free market.
The business manager setting a price on his goods today has to consider consumer demand, competition, political consequences, legal aspects, and even ethical aspects of pricing. In addition, he must consider his own costs, the cost of the channels he uses to reach the market, and the various activities he has to perform in connection with the sale, such as advertising and promotion, personal selling, freight, handling costs, discounts and allowances, and the like.
Furthermore, the product itself, and what it will do for the buyer, has a great deal to do with the price at which it will sell. An automobile is a modern means of transportation; it will carry the buyer from one place to another. But there are automobiles which sell for $2,000 and others which sell for $20,000. Thus, there are many influences which determine a particular price. We shall study some of these influences separately. We should start with the influence of the consumer.
In customer-oriented marketing, the consumer influences price. The value of a given product to the consumer is a prime consideration. Every product has utility for the buyer. It gives the buyer service, satisfaction, pleasure, the total of which is the value to a particular buyer.
This value is subjective; that is, it is personal with each buyer. A grandfather clock may be just what an antique collector wants, but it may have no value for a person living in a modern ranch house, or in an auto trailer. The price quoted could be the same to both, but the value to one would be much higher than to the other.
Personal, economic, social and psychological elements enter into each purchase made by a consumer. In each of these areas, the manufacturer must match strategy with consumer need or desire. The prestige of the brand, of the product, consumer buying habits, buying motives, all will influence the transaction. And consumer acceptance will, to a marked degree, influence the price of the merchandise.
If the consumer does not consider the value of the merchandise worth the price, he will refuse to buy. Obviously, then, with the multiplicity of choices available to the consumer, the first influence, dictating to the manufacturer what he should do about pricing, is the consumer himself.