Pricing Strategies

Question 1

Skimming

Answer 1

Introducing a product with a high price then lowering the price over time

Question 2

Penetration Pricing

Answer 2

Offering new products at low prices in the hopes of achieving high sales volume

Question 3

Odd-Even Pricing

Answer 3

Setting price at an odd number so consumers perceive a lower price (e.g., $19.95)

Question 4

Competition-Based Pricing

Answer 4

Setting a price based on competitors’ pricing.

Question 5

Demand-Oriented Pricing

Answer 5

Set prices based on consumer demand

Question 6

Fixed Costs

Answer 6

Business costs that remain constant regardless of the number of units produced

Question 7

Variable Costs

Answer 7

Business costs that varies with the number of units produced

Question 8

Profit equation

Answer 8

Profit = Total Revenue - total costs

Question 9

Total Revenue function

Answer 9

TR= Price (P) x Quantity (Q)

Question 10

Total Cost function

Answer 10

TC = Fixed costs + Variable costs

Question 11

Break-Even Analysis

Answer 11

A method of calculating the minimum volume of sales needed at a given price to cover all costs

Question 12

Break-Even Point

Answer 12

Sales volume (in units) at a given price that will cover all of a company’s costs

Question 13

Break-Even Point Equation

Answer 13

Break-even point = (fixed costs)/ (selling price - variable costs per unit)