Chapter 20 - Pricing Concepts Flashcards

1
Q

Price

A

that which is given up in an exchange to acquire a good or service

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2
Q

Revenue

A

the price charged to customers multiplied by the number of units sold

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3
Q

Profit

A

revenue minus expenses

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4
Q

Return on investment (ROI)

A

net profit after taxes divided by total investment

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5
Q

Market share

A

a company’s product sales as a percentage of total sales for that industry

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6
Q

Status quo pricing

A

a pricing objective that maintains existing prices or meets the competition’s prices

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7
Q

Demand

A

the quantity of a product that will be sold in the market at various prices for a specified period

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8
Q

Supply

A

the quantity of a product that will be offered to the market by a supplier at various prices for a specified period

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9
Q

Price equilibrium

A

the price at which demand and supply are equal

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10
Q

Elasticity of demand

A

consumer’s responsiveness or sensitivity to changes in price

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11
Q

Elastic demand

A

a situation in which consumer demand is sensitive to changes in price

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12
Q

Inelastic demand

A

a situation in which an increase or a decrease in price will not significantly affect demand for the product

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13
Q

Unitary elasticity

A

a situation in which total revenue remains the same when prices change

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14
Q

Dynamic pricing

A

a strategy whereby prices are adjusted over time to maximize a company’s revenues

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15
Q

Yield management system (YMS)

A

a technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discounting early purchases, limiting early sales at these discounted prices, and overbooking capacity

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16
Q

Variable cost

A

a cost that varies with changes in the level of output

17
Q

Fixed cost

A

a cost that does not change as output is increased or decreased

18
Q

Average variable cost (AVC)

A

total variable costs divided by quantity of output

19
Q

Average total cost (ATC)

A

total costs divided by quantity of output

20
Q

Average fixed cost (AFC)

A

total fixed costs divided by quantity of output

21
Q

Marginal cost (MC)

A

the change in total costs associated with a one-unit change in output

22
Q

Markup pricing

A

the cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for

23
Q

Keystoning

A

the practice of marking up prices by 100 percent, or doubling the cost

24
Q

Profit maximization

A

a method of setting prices that occurs when marginal revenue equals marginal cost

25
Q

Marginal revenue (MR)

A

the extra revenue associated with selling an extra unit of output or the change in total revenue with a one-unit change in output

26
Q

Break-even analysis

A

a method of determining what sales volume must be reached before total revenue equals total costs

27
Q

Selling against the brand

A

stocking well-known branded items at high prices in order to sell store brands at discounted prices

28
Q

Extranet

A

a private electronic network that links a company with its suppliers and customers

29
Q

Prestige pricing

A

charging a high price to help promote a high-quality image