How firms set prices ??

The Biggest question after making a product is what should be the price of the product??. It should be less than the competitor so that people will get attracted or It should be greater than the competitor so that people will think this is a better product. There are infinity question around how firms set product prices??

Below details are just a small incite to the pricing details...

 Relative Price:

The difference between nominal price and relative or real price (as exchange ratio) is often made. Nominal price is the price quoted in money while relative or real price is the exchange ratio between real goods regardless of money. The distinction is made to make sense of inflation. When all prices are quoted in terms of money units, and the prices in money units change more or less proportionately, the ratio of exchange may not change much. In the extreme case, if all prices quoted in money change in the same proportion, the relative price remains the same

A  Mom comes to visit her son Kunal for dinner.....who lives with a girl roommate Sunita.

During the course of the meal, his mother couldn't help but notice how pretty Kunal's roommate was. She had long been suspicious of a relationship between the two, and this had only made her more curious. Over the course of the evening, while watching the two interact, she started to wonder if there was more between Kunal and his roommate than met the eye. Reading his mom's thoughts, Kunal volunteered, "I know what you must be thinking, but I assure you, Sunita and I are just roommates."

About a week later, Sunita came to Kunal saying, "Ever since your mother came to dinner, I've been unable to find the silver chutney jar. You don't suppose she took it, do you?" Kunal said ,"Well, I doubt it, but I'll email her, just to be sure."

So he sat down and wrote: