Read the overview below and complete the activities that follow. The importance of pricing decisions is growing because today's customers have more alternatives to choose from and are better informed about the alternatives available in the marketplace. Customers are in a better position to seek a good value when they buy merchandise and services. Value is the ratio of what customers receive (the perceived benefit of the products and services offered by the retailer) to what they have to pay for it. Retailers can increase value and stimulate more sales by either increasing the perceived benefits offered or reducing the price. Four factors retailers consider in setting retail prices are the price sensitivity of customers, the cost of the merchandise, competition, and legal constraints. Generally, as the price of a product increases, the sales for the product will decrease because fewer customers feel the product is a good value. In addition, customers have many choices for goods and services and can use multiple search tools to find the best value. Retailers also have to consider the cost of the merchandise in determining the retail sales price. Cost of merchandise Click and drag the pricing components to complete the following equations. Actual unit sales price-Unit variable cost Component 1 Component 2 Ratio Retail Price / Elasticity Markup + Retailer Price II 1 Markup Percentage II Retailer price- Cost of merchandise Percentage change in quantity sold = Break-Even Quantity Percentage change in price Fixed Costs