BS7- Price Flashcards
State the definition of the key term price
the amount of money expected, required, or given in payment for something.
Describe what is meant by price skimming
It is where the business sets a high price for its goods in order to attempt to gain profits quickly
A business is using cost plus pricing, the cost of each unit is £5 and the business decides to add a mark up of 125% what is the price
5 x 1.25= £6.25
Outline the difference between competition based and penetration pricing
Completion pricing is when a new business comes into a market they try and get a lower price than the competition where as penetration pricing is where the competition try and push the new business out by raising there prices
Describe how the hotel industry may use marginal pricing
A hotel may use it to see how may rooms they need to sell a night to cover the variable costs
Identify with an example, what is meant by psychological pricing
It is setting a price that is lower than it sounds, for example 99p not £1
Identify the formula used for price income and cross elasticity of demand
Income Elasticity of demand = percentage change in demand / percentage change in income
Cross elasticity of demand = percentage change in the demand for a / percentage change in the price of b
The price elasticities of demand of a product is -0.1 outline what this informs the marketing team about the changing of price
Demand will decrease when price is increased
Outline why the demand for some products for income increases
People can afford more premium items, for example when doing shopping they may go for a more premium orange juice over an own brand
Describe one characteristic of a good that has high income elasticity of demand 
Tesco bread as there are many alternatives
