Pricing Concepts Flashcards
hat which is given up in an exchange to acquire a good or service
Price
The price charged to customers multiplied by the number of units sold
Revenue
Revenue minus expenses
Profit
Net profit after taxes divided by total assets
Return On Investment (ROI)
A company’s product sales as a percentage of total sales for that industry
Market Share
A pricing objective that maintains existing prices or meets the competition’s prices
Status Quo Pricing
he quantity of a product that will be sold in the market at various prices for a specified period
Demand
The quantity of a product that will be offered to the market by a supplier at various prices for a specified period
Supply
The price at which demand and supply are equal
Price Equilibrium
Consumers’ responsiveness or sensitivity to changes in price
Elasticity Of Demand
A situation in which consumer demand is sensitive to changes in price
Elastic Demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product
Inelastic Demand
A situation in which total revenue remains the same when prices change
Unitary Elasticity
A strategy whereby prices are adjusted over time to maximize a company’s revenues
Dynamic Pricing
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
Yield Management System (YMS)
A cost that varies with changes in the level of output
Variable Cost
A cost that does not change as output is increased or decreased
Fixed Cost
Total variable costs divided by quantity of output
Average Variable Cost (AVC)
Total costs divided by quantity of output
Average Total Cost (ATC)
Total fixed costs divided by quantity of output
Average Fixed Cost (AFC)
The change in total costs associated with a one-unit change in output
Marginal Cost (MC)
he cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for
Markup Pricing
The practice of marking up prices by 100 percent, or doubling the cost
Keystoning
A method of setting prices that occurs when marginal revenue equals marginal cost
Profit Maximization
The extra revenue associated with selling an extra unit of output or the change in total revenue with a one-unit change in output
Marginal Revenue (MR)
A method of determining what sales volume must be reached before total revenue equals total costs
Break-Even Analysis
Stocking well-known branded items at high prices in order to sell store brands at discounted prices
Selling Against The Brand
A private electronic network that links a company with its suppliers and customers
Extranet
Charging a higher price to help promote a high-quality image
Prestige Pricing
