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Business Studies · 2025 · 6 marks
CBSE 2025 · Region 2 · Set 1 · Q34
Ravi and Megha started 'Energylights' a company
manufacturing energy-efficient LED lighting after realizing
an increasing demand for the same. Manufacturing high-
quality LED lights with some unique features required
substantial investment in technology and high-grade
materials. This pushed up their cost of manufacturing. To
determine the price of their LED lights they not only wanted to cover all costs but also wanted to earn a margin
of profit over and above the costs. This will set for them the
minimum level or the floor price at which the LED lights
would be sold. The high demand and the utility provided by
these lights will set the upper limit of the price.
Though there was enough competition in LED lights
business, even then they kept the price of their lights higher
than the competitors because of good quality and its
features. They justified the higher price because of the
product differentiation and unique methods of advertising
and sales promotion etc.
Quoting lines from the above para, identify and explain any
three factors which were taken into consideration by Ravi
and Megha to determine the price of their LED lights.
Marking-scheme solution
Factors taken into consideration by Ravi and Megha to
determine the price of their LED lights were:
(i)
Product cost
Product cost includes the cost of producing, distributing and
selling the product. It determines the minimum level or the
floor price at which the product may be sold.
‘To determine the price of their LED lights they not only
wanted to cover all costs but also wanted to earn a margin of
profit over and above the costs’
‘This will set for them the minimum level or the floor price at
which the LED lights would be sold’
(ii)
The utility and demand
Utility and demand set the upper limit of the price which the
buyer would be prepared to pay. The buyer may be ready to
pay up to the point where the utility from the product is at least
equal to the sacrifice made in terms of the price paid. However,
the seller would, however, try to at least cover the costs.
‘The high demand and the utility provided by these lights will
set the upper limit of the price’
(iii)
Extent of competition in the market
In lesser competition, the price will tend to reach the upper
limit while in free competition; the price will tend to be set at a
lower level. Not only the price but the quality and the features
of the competitive products must be examined carefully before
fixing the price.
‘Though there was enough competition in LED lights business,
even then they kept the price of their lights higher than the
competitors because of good quality and its features’
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CBSE Class 12 Business Studies past-paper question from the 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.