Chapter 13

Question 1

what is price?

Answer 1

money or other considerations (incl. other goods and services) exchanged for the ownership or use of a good or service

Question 2

what is value?

Answer 2

ratio of perceived benefits to price

Question 3

what are the 6 steps in the price setting process?

Answer 3

1. identify price constraints and objectives
2. estimate demand and revenue
3. estimate cost, volume, and profit relationships
4. select and appropriate price level
5. set list or quoted price
6. make special adjustments to list/ quoted price

Question 4

What are the factors that limit the latitude of prices a firm may set?

Answer 4

1. consumer demand for the product
2. newness of the product
3. cost of producing
4. nature of the competition
5. competitor prices
6. legal and regulatory factors

Question 5

what are the 5 different pricing objectives?

Answer 5

1. profit
2. sales
3. market share
4. unit volume
5. survival

Question 6

what is the BEP? how do you calculate it?

Answer 6

analyzes the relationship between total revenue and total cost to determine profitability at various levels of output

BEP= FC/ (p-VC)

Question 7

what are the 4 approaches to setting an approx. price level?

Answer 7

1. demand oriented pricing
2. cost oriented
3. profit oriented
4. competition oriented

Question 8

what are the various demand oriented price setting approaches?

Answer 8

skimming, penetration pricing, prestige, price lining, target, bundle, yield management

Question 9

what are the various cost oriented price setting approaches?

Answer 9

standard markup, cost plus

Question 10

what are the various profit oriented price setting approaches?

Answer 10

target profit, target return on sales

Question 11

what are the various competition oriented price setting approaches?

Answer 11

customary, above/ below/ at market, loss leader