Pricing Decisions (1) Flashcards
Historically, what would the cost of a product have had?
A large influence on the selling price set for that product
Factors that influence price? (De)
Demand
Factors that influence price? (Q)
Quality
Factors that influence price? (C)
Competitors
Factors that influence price? (Su)
Substitutes
Factors that influence price? (I)
Inflation
Factors that influence price? (A)
Age of product
Factors that influence price? (Di)
Disposable incomes
Why does price impact volume sold?
Since a higher price will normally lower the volume sold
Why do some organisations consider increasing revenue?
If the fall in volume sold is lower than the increase in the price
What is price-inelastic?
Demand is said to be unresponsive to price changes
What is price elasticity of demand (PED)?
Measures the extent of the change in market demand for a product or service in response to a change in its price
What can the value of elasticity be?
Anything from zero to infinity
if value of elasticity is less than one?
The demand is inelastic
if value of elasticity is greater than one?
The demand is elastic
is demand being inelastic normal?
Ues because PED is expected to be negative since demand will fall if price rises and vice versa
When is demand referred to as elastic?
If percentage change in demand is higher than the percentage change in price
Effect where demand is inelastic?
Prices can be raised without significantly affecting demand
Effect where demand is elastic?
A decrease in price will result in an increase in volume
How might income act to reduce elasticity
if a good takes up a low percentage of customer income, customers are less sensitive to price rises
How might degree of necessity act to reduce elasticity
An essential item will still have to be bought even if price rises
How might availability of alternative products act to reduce elasticity
If there are few alternative substitute goods or services, there will be a smaller fall in demand if price rises
