Compettion Based Pricing

Question 1

Contribution pricing/ marginal pricing

Answer 1

Set price to be more than the variable cost per unit.

The price of each I to makes a contribution to then fixed costs.

Question 2

Absorption pricing

Answer 2

Allocates a proportion of the fixed costs to each unit so the price is based on the variable costs per unit plus a slice of the fixed costs per unit.

Question 3

Target based pricing

Answer 3

Set price based on the target profit that the firm have set.

Question 4

Penetration pricing

Answer 4

Low initial price to get into market. As volume of sales goes up so does the price

Question 5

Price discrimination

Answer 5

Different prices are changed for the same product - e.g. Plain tickets differs on price depending on when you travel

Question 6

Price skimming

Answer 6

Means staying with a high price and reducing it later. The price can come down when the project has reached economies of scale.

Question 7

Psychology pricing

Answer 7

Bases price on customers expectations about what to pay

Question 8

What is cost plus pricing?

Answer 8

Takes direct and indirect costs of production into account, and adds a fixed percentage called the markup