Chapter 13 Final Flashcards
what is the price formula?
final price = list price - (incentives + allowances) + extra fees
what is the profit equation?
profit = total revenue (unit price x quantity sold) - total cost (FC + VC)
what are the 6 steps in setting a price?
- identify pricing objectives and constraints
- estimate demand and revenue
- determine cost volume and profit
- select approx price level
- set list price
- make adjustments to list price
what does identifying pricing objectives entail?
looking at the role of a product’s price in a company’s marketing plan
what does identifying pricing constraints entail?
looking at the constraints that limit the range a company can price their product at (ex: demand for product, newness of product)
what are the 4 types of competitive markets?
- pure competition
- monopolistic competition
- oligopoly
- pure monopoly
what is a pure competition?
where there are many sellers that follow a market price and sell identical products
what is a monopolistic competition ?
where there are many sellers that compete on non price factors
what is an oligopoly?
where there are few sellers that are sensitive to competitors changes in prices
what is a pure monopoly?
where there is one seller who sets the price because of their unique product
what does estimating demand entail?
looking at the demand curve which shows the max amount of units that will be sold at a given price
what does a movement along the curve entail?
that there has been a shift of demand due to a change in price
what does a shift of the demand curve entail?
that there have been demand changes due to a non price factor such as an increase in advertising
what is elastic demand?
that there has been a 1% price decrease resulting in over 1% quantity increase
what is inelastic demand?
that there has been a 1% price decrease resulting in less than 1% quantity increase
