Paper 1 · The Marketing Mix
A firm selling a product with many close substitutes will find that its pricing is most constrained by
Aprice elasticity of demand and rival prices
Bthe size of its issued share capital
Cthe accounting standards it applies to stock
Dthe length of its financial year
Explanation: Where substitutes are easy to find, demand is highly elastic: a small price rise sends buyers to a rival and revenue falls. The firm therefore has very little room to price above the market, whatever its own costs or capital structure may be.
Derived from ZIMSEC Business Enterprise Skills Paper 1, Nov 2018, Q10