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Price Adjustments: Geographic Pricing

Products requiring marketers to pay higher costs that are affected by geographic area in which a product is sold may result in adjustments to compensate for the higher expense. The most likely cause for charging a different price rests with the cost of transporting a product from the supplier’s distribution location to the buyer’s place of business. If the supplier is incurring all costs for shipping then they may charge a higher price for products in order to cover the extra transportation costs. For instance, shipping products by air to Hawaii may cost a Los Angeles, California manufacturer a much higher transportation cost than a shipment made to San Diego.

Transportation expense is not the only cost that may raise a product’s price. Special taxes or tariffs may be imposed on certain products by local, regional or international governments which a seller passes along in the form of higher prices.

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