Pricing Concepts

Question 1

hat which is given up in an exchange to acquire a good or service

Answer 1

Price

Question 2

The price charged to customers multiplied by the number of units sold

Answer 2

Revenue

Question 3

Revenue minus expenses

Answer 3

Profit

Question 4

Net profit after taxes divided by total assets

Answer 4

Return On Investment (ROI)

Question 5

A company’s product sales as a percentage of total sales for that industry

Answer 5

Market Share

Question 6

A pricing objective that maintains existing prices or meets the competition’s prices

Answer 6

Status Quo Pricing

Question 7

he quantity of a product that will be sold in the market at various prices for a specified period

Answer 7

Demand

Question 8

The quantity of a product that will be offered to the market by a supplier at various prices for a specified period

Answer 8

Supply

Question 9

The price at which demand and supply are equal

Answer 9

Price Equilibrium

Question 10

Consumers’ responsiveness or sensitivity to changes in price

Answer 10

Elasticity Of Demand

Question 11

A situation in which consumer demand is sensitive to changes in price

Answer 11

Elastic Demand

Question 12

A situation in which an increase or a decrease in price will not significantly affect demand for the product

Answer 12

Inelastic Demand

Question 13

A situation in which total revenue remains the same when prices change

Answer 13

Unitary Elasticity

Question 14

A strategy whereby prices are adjusted over time to maximize a company’s revenues

Answer 14

Dynamic Pricing

Question 15

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

Answer 15

Yield Management System (YMS)

Question 16

A cost that varies with changes in the level of output

Answer 16

Variable Cost

Question 17

A cost that does not change as output is increased or decreased

Answer 17

Fixed Cost

Question 18

Total variable costs divided by quantity of output

Answer 18

Average Variable Cost (AVC)

Question 19

Total costs divided by quantity of output

Answer 19

Average Total Cost (ATC)

Question 20

Total fixed costs divided by quantity of output

Answer 20

Average Fixed Cost (AFC)

Question 21

The change in total costs associated with a one-unit change in output

Answer 21

Marginal Cost (MC)

Question 22

he cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for

Answer 22

Markup Pricing

Question 23

The practice of marking up prices by 100 percent, or doubling the cost

Answer 23

Keystoning

Question 24

A method of setting prices that occurs when marginal revenue equals marginal cost

Answer 24

Profit Maximization

Question 25

The extra revenue associated with selling an extra unit of output or the change in total revenue with a one-unit change in output

Answer 25

Marginal Revenue (MR)

Question 26

A method of determining what sales volume must be reached before total revenue equals total costs

Answer 26

Break-Even Analysis

Question 27

Stocking well-known branded items at high prices in order to sell store brands at discounted prices

Answer 27

Selling Against The Brand

Question 28

A private electronic network that links a company with its suppliers and customers

Answer 28

Extranet

Question 29

Charging a higher price to help promote a high-quality image

Answer 29

Prestige Pricing