State and explain two pricing methods that a business can use.

Businesses use various pricing strategies depending on their objectives, market, and product. - **Cost-plus pricing:** The simplest method. The firm calculates the average cost per unit and adds a profit margin (mark-up). It guarantees a profit on each item but ignores market demand and competitor prices. - **Competitive pricing:** Setting prices based on competitors. This can be pricing at the same level (price leadership), slightly below to gain market share, or slightly above if the product has a better quality or brand image. - **Penetration pricing:** Setting a very low initial price to enter a competitive market and build market share quickly. The price is often raised later. - **Price skimming:** Launching a new, often innovative, product with a high initial price to maximise revenue from "early adopters" before competitors enter the market. The price is lowered over time.