a. Role of Pricing in the Economy (Simple Explanation)

i. Price as a Signal for Shortages and Surpluses

What it means:
Prices help tell us if a product is in shortage (not enough supply) or in surplus (too much supply).

• If there is a shortage (not enough product), the price goes up.

• If there is a surplus (too much product), the price goes down.

Malaysian Example:
Let’s say during the monsoon season, there are not enough vegetables from Cameron Highlands because of floods.

• Fewer vegetables = shortage

• The price of sayur like sawi or tomato goes up at the market.

Later, when farmers harvest a lot of vegetables, the supply becomes high.

• Too many vegetables = surplus

• The price drops to attract buyers.

So, pricing helps people know what is happening in the market – shortage or surplus.

ii. Prices Help Redistribute Resources

What it means:
Prices help businesses and farmers decide what to produce more of, and where to sell. It helps move money and resources to where they are most needed.

Malaysian Example:
If the price of coconuts suddenly increases because people are buying a lot for making kuih and coconut drinks,

• More farmers may start growing coconuts.

• Traders may move more coconuts to high-demand areas like city markets.

This shows how high prices can encourage producers to send more products or grow more crops. Pricing helps move resources to where they are needed most.

b. Role of Pricing in the Marketing Mix (Simple Explanation)

i. Price Decisions Must Be Coordinated with Other Marketing Mix Strategies

(Product, Place, Promotion)

What it means:
Price must match the product quality, where it is sold, and how it is promoted. All parts of the marketing mix must work together.

Example (Malaysia):
If Secret Recipe sells cakes with good ingredients and a nice shop, they must also set a price that fits that image — not too cheap, or people will think it’s low quality.

ii. Price Affects Product Image

What it means:
Price tells customers what kind of product it is — cheap, affordable, or premium.

Example (Malaysia):

• A handbag from Padini priced at RM89 gives an image of affordable fashion.

• A handbag from Bonia priced at RM500+ gives an image of high-class or luxury.

The price creates the brand image in the customer's mind.

iii. Price Gives Profit to Retailers and Wholesalers

What it means:
Retailers (like shops) and wholesalers (who sell in bulk) need to earn profit from the prices they set.

Example (Malaysia):
A wholesaler sells a box of Milo sachets at RM25.

• A retailer buys it and sells each sachet to customers for RM1.50, earning a profit.

Pricing is important so both wholesaler and retailer can make money.

iv. Price Plays a Role in Promotion

What it means:
Low or discounted prices can be used in sales promotions to attract customers.

Example (Malaysia):
During Shopee 11.11 Sale, sellers offer discounts like "Buy 1 Free 1" or RM5 off — this lower price is part of the promotion strategy to get more sales.