Chapter 18 Flashcards
What is a Barter ?
the trading of products
What is Price Competition?
and matching or beating competitor’s prices
What is non-price competition?
Characteristics other than price to distinguish a product from competitive brands
What is the formula for profit and profits
- Profit = T. revenue - T. Cost
- Profits = (Price x Quantity sold) - T. Costs
What is Markup?
is the difference between the cost of a good and its selling price
What is Price Elasticity of demand?
a measure of the sensitivity of demand to changes of price
What is an elastic demand?
A change in price causes an opposite change in QD
What are some Elasticity Determinants?
- Availability of substitutes
- Percentage of income
- Necessity
- Time
- Brand Equity
What is an Break-Even Point?
- Where costs of producing a product equal the revenue
What is Marginal Analysis?
Examines what happens to a firm’s costs and revenues when production or sales volumes changes by one unit
What is Marginal Cost?
is extra cost incurred for producing one more unit of product
What is Marginal Revenue?
change in total revenue when a firm sells one additional unit of product
What is the formula for Average Fixed Costs?
Fixed Costs/Units Produced
What is the formula for Average Variable Costs?
Variable Costs/Units Produces
What are some reference Prices?
- Internal and external reference price
What is Reference Price?
The price stored in memory that helps to evaluate the actual price
What is Internal Reference Price?
Develops in buyer’s mind through experience with product
What is External Reference Price?
A comparison price provided by others
What is Price Framing? EX
- Anchoring price for consumers
- MSRP, Competitiors Price, “You Save”
What is Bundling ?
Offering several products for sale in one “package”
What are some Price strategies?
- Framing
- Bundling
- Unbundling
Which are some Pricing Objectives?
- Sales Oriented
- Profit oriented
What is Sales Oriented?
Set prices low to maximize sales
What is Profit Oriented?
Pricing strategy focused on profits
What is target profit pricing?
All products must have at least a 10% profit marging
What is Maximize profits?
Use sophisticated mathematical models to maximize profits
What is customer oriented?
focused on providing value
What some general pricing Strategies?
Skimming, Penetration, Neutral
What is skimming useful with? Ex?
- Useful with inelastic demand, early life cycle stage
- Consulting, Health Care
what is Penetration useful with? Ex?
- Useful with elastic elastic demand
- Fast food
