prices

Question 1

how is pricing different from other p’s?

Answer 1

• price is the only one that brings in REVENUE $$$ (all others use cash)
• price is quantifiable to customers
• price is (somewhat) easy to change

Question 2

cost-based pricing

Answer 2

sell enough to at least recover your costs

Question 3

cost-based pricing for profit

Answer 3

… how to make a profit

Question 4

limitations to cost-plus pricing (4)

Answer 4

1. costs often not easy to determine
2. cost-plus is product oriented
3. ignores competitors’ prices
4. ignores what consumers are willing to pay for it

Question 5

elasticity of demand

Answer 5

e = %△ in quantity demanded/%△ in price

Question 6

methods to estimate demand curves (3)

Answer 6

1. survey → “how many units would you buy at a price of $4?”
2. price experiment → vary prices in similar locations and then record sales effects
3. statistical analysis → determine relationship between price and quantity sold using past prices, quantities sold

Question 7

consumer psychology & pricing?

Answer 7

consumers may not always perceive prices “objectively” or “rationally”

Question 8

sale signs & prices that end in 9 are more effective when

Answer 8

• used less frequently
• consumers’ prior knowledge is poor
• for infrequently purchased items or for new categories