Module 6 Pricing Flashcards
1
Q
Cost plus pricing
A
Add a mark-up on top of the cost of the product
2
Q
Psychology of pricing
A
- Price anchoring (products placed next to more expensive ones)
- The power of 9 (£9.99 vs £10.00)
- Decoy pricing (popcorn prices for different sizes)
3
Q
Three factors of the Law of Demand
A
- The law of diminishing marginal utility
- The income effect
- The subsitute effect
4
Q
The Price of Substitutes
A
- May be used instead of a product
- If subsitue is cheaper the demand of the orginal will decrease
5
Q
Price Elasticity of Demand Equation
A
Almost always negative
- PED>1 - Elastic
- PED<1 - Inelastic
6
Q
Factors that influence PED
A
- Subsitute products
- Advertising and tastes
- Luxury or Necessity
- The proportion of Income spent on the Good
- Time
7
Q
Cross-price Elasticity of Demand Equation
A
8
Q
Income Elasticity of Demand
A
9
Q
What would cause the supply curve to shift left or right?
A
- The cost of making the good
- Technology
- Government regulations
- The profitability of alternative products
10
Q
Price Elasticity of Supply Equation
A
Almost always positive
- PES>1 - Elastic
- PES<1 - Inelastic
11
Q
Factors that inluence PES
A
- Time period being considered
- Cost of changing output
12
Q
Factors of Production
A
- Land - Rent
- Labour - Wages
- Capital - Interest
- Enterprise - Profit
13
Q
Target pricing
A
- Level of funding the business has
- Level of return that it needs to make
- Work back to cost
14
Q
Market skimming
A
- High price for new product
- Price lowered at later date once initial consumers are satisfied
- Attract next price layer
15
Q
Premium pricing
A
- Prices are set and kept at a high
16
Q
Market penetration
A
- New product priced low or loss
- Gain a high market share quickly
- Price may stay low or increase
17
Q
Limit pricing
A
- Firm with a dominant position
- Set prices low
- Deter other businesses
18
Q
Dynamic pricing
A
Prices are flexible and change based on market demands
19
Q
Freemium
A
- Basic features are free of charg
- Additional features and functionality must be paid for
20
Q
Loss leader
A
- Product is deliberately sold at loss
- Attract customers who purchase other more profitable goods
21
Q
Pay what you want
A
- Allows consumers the freedom to choose the price
- Business may give a suggested price or minimum
22
Q
The Price of Complements
A
- Products used alongside each other
- Complementary product cheaper, increases demand for orginal
23
Q
Consumer Incomes
A
- Demand for normal goods increase as income increases
- Demand for inferior goods decreases as income increases
24
Q
Tastes
A
- Demand increases if it comes into fashion
25
Q
Expectations of Future Price Rises
A
- Demand will increase to beat the price rise
26
Q
Legislation
A
- Ban on phones may increase the demand for hands free
