Which of the following is an example of a demand-oriented approach to setting an approximate price?

• A. Calculating the price by adding a fixed markup to production costs
• B. Matching the price to that of the closest competitor
• C. Setting the price equal to the average cost of production
• D. Setting the price based on consumers' willingness to pay for the product

Answer: (D)

Verified step by step guidance

1. Understand that a demand-oriented pricing approach focuses on the consumers' willingness to pay and perceived value rather than just costs or competitors' prices.
2. Identify that adding a fixed markup to production costs is a cost-oriented approach, as it starts from costs and adds profit margin.
3. Recognize that matching the price to the closest competitor is a competition-oriented approach, as it bases price on competitors' pricing strategies.
4. Note that setting the price equal to the average cost of production is also cost-based, aiming to cover costs without directly considering demand.
5. Conclude that setting the price based on consumers' willingness to pay directly reflects demand orientation, as it uses consumer preferences and perceived value to determine price.