Pricing Strategies / Functions / Mechanism

Question 1

Pricing strategies

Answer 1

Limit pricing
Revenue maximisation
Profit maximisation
Predatory pricing
Sales volume pricing
Normal pricing
Price war

Question 2

Limit pricing

Answer 2

Charging below the average cost of your rivals

Question 3

Predatory pricing

Answer 3

Charging a price to force new rivals out

Question 4

Revenue maximisation

Answer 4

Pricing in order to bring in considerable revenue
(Get lots of cash to cover costs eg staff paid well = better service)

Question 5

Profit maximisation

Answer 5

Pricing to satisfy shareholders - making as much profit as possible

Question 6

Normal pricing

Answer 6

Pricing to cover your ATC (average total costs)

Question 7

Price war

Answer 7

Constantly undercutting your equally powerful rival

Question 8

Sales volume pricing

Answer 8

Charging a price where AR=AC (average revenue = average cost)
To survive

Question 9

Non-pricing strategies

Answer 9

Loyalty card system
Customer service
Car parking
Location
Product quality

Question 10

Price mechanism definition

Answer 10

Interaction of buyers and selling sun fee markets
Allows goods, services and resources to be allocated by prices

Question 11

3 functions of the price mechanism

Answer 11

Rationing function
Signalling function
Incentive function

Question 12

Signalling function

Answer 12

Price changes send contrasting messages to consumers and producers about whether to enter or leave a marker
Higher price (good for business bad for consumer) = less demand (bad for business)

Question 13

Incentive function

Answer 13

Motivates a producer or consumer to follow a course of action (eg profit)

Question 14

Rationing function

Answer 14

Scarce resources = more demand = higher price
More scarce/price = more the resource is rationed = less can buy it