How to answer questions

　　Example question:

　　What determines the price of a product?

　　Example answer:

　　● The price of a product is influenced by the costs. 1

　　● This is because firms have to charge a price which is greater than costs to make a profit. 2

　　● However in the short run a firm may sell a product at a loss. This may be to gain market share or because the product is still at the introduction phase and has high research and launch costs. 3

　　● Overall it depends on whether we are considering a short or long term pricing policy. Firms may be willing to make a loss in the short run. It will also depend on the objectives of the firm. Some public sector organisations, e.g. may simply try to cover costs.