External Factors Influencing Price

These are outside factors that a business cannot control but must consider when deciding how much to charge for its product or service.

a. Economy

When the economy is good, people have more money to spend, and businesses can charge higher prices. During hard times (like a recession), prices may need to be lower.

✅ Example (Malaysia):
During the COVID-19 pandemic, many shops in Malaysia lowered their prices or gave discounts because people had less money to spend.

b. Government

The government can affect pricing through taxes, price controls, and regulations.

✅ Example (Malaysia):
The government sets ceiling prices for some essential items like cooking oil and sugar to protect consumers from high prices.

c. Technology

New technology can help companies produce goods faster and cheaper, which may reduce prices. It also allows online selling, which may lower overhead costs.

✅ Example:
Shopee and Lazada use technology to sell directly to customers, often offering cheaper prices than physical stores.

d. Supplier

If the cost of raw materials or ingredients goes up, the selling price usually increases too.

✅ Example:
If the price of chicken feed increases, then chicken sellers in Malaysia (like Ayamas) may raise the price of chicken products.

e. The Market and Demand

If demand is high, businesses can raise the price. If demand is low, they may need to lower prices to attract buyers.

✅ Example:
During Hari Raya, the demand for baju kurung increases, so shops may increase prices due to higher demand.