Chapter 20 - Pricing Concepts Flashcards
Price
that which is given up in an exchange to acquire a good or service
Revenue
the price charged to customers multiplied by the number of units sold
Profit
revenue minus expenses
Return on investment (ROI)
net profit after taxes divided by total investment
Market share
a company’s product sales as a percentage of total sales for that industry
Status quo pricing
a pricing objective that maintains existing prices or meets the competition’s prices
Demand
the quantity of a product that will be sold in the market at various prices for a specified period
Supply
the quantity of a product that will be offered to the market by a supplier at various prices for a specified period
Price equilibrium
the price at which demand and supply are equal
Elasticity of demand
consumer’s responsiveness or sensitivity to changes in price
Elastic demand
a situation in which consumer demand is sensitive to changes in price
Inelastic demand
a situation in which an increase or a decrease in price will not significantly affect demand for the product
Unitary elasticity
a situation in which total revenue remains the same when prices change
Dynamic pricing
a strategy whereby prices are adjusted over time to maximize a company’s revenues
Yield management system (YMS)
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