Marketing Ch.13 Flashcards
Value
the ration of precieved benifits to price or value=benifits/price
value pricing
the practice of simultaneously increasing product and service benefits while maintaining or decreasing price
profit equation
profit=total revenue-total cost = (unit price*quantity sold)+(fixed cost + variable cost)
Pricing objectives
specifying the role of price in an organizations marketing and strategic plans
pricing constraints
the factors that limit the range of prices a firm may set
demand curve
graph relating the quantity sold and price
demand factors
factors that determine consumer’s willingness and ability to pay for products and services
Total Revenue(TR)
TR=P*Q
P=unit price
Q=quantity sold
Total money recieved from the sale of a product
Average Revenue
is the average amount of money received for selling one unit of a product, or simply the price of that unit. Average revenue is the total revenue divided by the quantity sold:
AR=(TR)/Q = P
Marginal Revenue(MR)
is the change in total revenue that results from producing and marketing one additional unit of a product
MR=(change in TR)/(1 unit increase in Q)=(deltaTR/deltaQ)= slope of TR curve
Price Elasticity of Demand-
percent change in quantity demand relative to a percent change in price
(% change in quantity demanded)/(% change in price)
Elastic Demand
when a 1 percent decrease in price produces more than a 1% increase in quantity demanded (increasing sales revenue)
Inelastic Demand-
exists when a 1 percent decrease in price produces less than a 1% increase in quantity demanded (decreasing sales revenue)
Unitary Demand-
exists when the % change is identical
more substitues
more price elastic
product and services considere to be necessities
price inelastic
items that require a large cash outlay compared with a person’s disposable income
price elastic
Total Cost TC
total expense incurred by a firm in producing/marketing a product
TC=FC+VC
Fixed Costs(FC)
sum of expenses of the firm that are stable and do not hcange with the quantity of a product that is produced and sold. (ie rent)
Variable Cost (VC
the sume of the expenses of the firm that vary directly with the quantity of a product that is produced and sold.
Unit Variable Cost (UVC)
vairable cost expressed on a per unit basis for a product
UVC=VC/Q
Marginal Cost (MC)
change in total cost that resuluts form producting ad marketing one additional unit of a product
MC=(change in TC/1 unit increase in Q)=(deltaTC/deltaQ)= slope of TC curve
Margnal Analysis
people will continue to do something as long as the incremental return exceeds the incremental cost
Break Even analysis
analyzes the relationship between total revenue and total cost to determine profitability at various levels of output
Break even point
quantity at which total revenue=total cost
BEP=(fixed cost/(unit price-unit vairable cost))= FC/P-UVC
