Overview, Learning Objectives, & Checklist

Question 1

What elements make up a price?

Question 2

What objectives does a firm have in setting prices?

Question 3

What is a demand curve?

Question 4

What role does revenue play in pricing decisions?

Question 5

What does price elasticity of demand mean to a manger facing a pricing decision?

Question 6

What role do costs make in pricing decisions?

Question 7

How do various combinations of price, fixed cost and unit variable cost affect a firm’s break-even point?

Question 8

How is an “approximate price level” established using a demand-oriented approach?

Question 9

How is an “approximate price level” established using a profit-oriented approach?

Question 10

How is an “approximate price level” established using a competition-oriented approach?

Question 11

What major factors are considered in deriving a final list or quoted price from the approximate level?

Question 12

What adjustments can be made to the approximate price level through discounts?

Question 13

What adjustments can be made to the approximate price level through the basis of discounts?

Question 14

What adjustments can be made to the approximate price level through geography?

Question 15

How do laws and regulations affect pricing practices?

Question 16

3 Factors that affect Demand Curve

Question 17

Price

Question 18

Allowances

Question 19

Price Elasticity of Demand

Question 20

Barter

Question 21

Pricing Constraint

Question 22

Break-Even Analysis

Answer 22

Relationship between total revenue and total cost to determine profitability at various levels of output

Question 23

Pricing Objective

Question 24

Break-even Chart

Question 25

Profit

Question 26

Break-even Point

Answer 26

When Total Revenue = Total Cost

Question 27

Profit Equation

Question 28

Contribution Margin

Question 29

Profitability Objective

Question 30

Demand Curve

Question 31

Sales Revenue Objective

Question 32

Demand Factors

Question 33

Social Responsibility Objective

Question 34

Elastic Demand

Question 35

Survival Objective

Question 36

Extra fees

Question 37

Total Cost

Question 38

Final Price

Question 39

Total Revenue

Answer 39

Total money received from the sale of a product

Question 40

Fixed Cost

Question 41

Unit Variable Cost

Question 42

Incentives

Question 43

Unit Volume Objective

Question 44

Inelastic Demand

Question 45

Value

Question 46

List Price

Answer 46

Established price normally quoted to potential buyers

Question 47

Value Pricing

Answer 47

The practice of simultaneously increasing product and service benefits while maintaining or decreasing price

Question 48

Market Share Objective

Question 49

Variable Cost

Question 50

Above-, At, or Below-market pricing

Answer 50

Setting a price based on a subjective feel for the competitors’ price or market price as the benchmark

Question 51

Predatory Pricing

Answer 51

Charging a very low price for a product with the intent of driving competitors out of business

Question 52

Allowance

Question 53

Prestige Pricing

Answer 53

Setting a high price so that consumers that value quality or status will be attracted to the product

Question 54

Basing-point Pricing

Question 55

Price Fixing

Answer 55

A conspiracy among firms to set prices for a product

Question 56

Cash discount

Question 57

Price lining

Question 58

Cost-plus pricing

Question 59

Price War

Question 60

Cumulative Quantity Discount

Question 61

Product Line Pricing

Question 62

Customary Pricing

Answer 62

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors

Question 63

Promotional Allowance

Question 64

Deceptive Pricing

Answer 64

Bait-and-Switch The practice of misleading consumers with price deals

Question 65

Quantity discounts

Question 66

Dynamic Price Policy (aka flexible price policy)

Question 67

Seasonal Discount

Question 68

Single-zone Pricing

Question 69

Skimming Pricing

Answer 69

Setting the highest initial price that customers who really desire the product are willing to pay when introducing a new or innovative product

Question 70

Everyday Low Pricing

Question 71

Experience Curve Pricing

Question 72

Fixed Price Policy (aka one price policy)

Question 73

FOB Origin Pricing

Question 74

Standard Markup Pricing

Question 75

Target Pricing

Answer 75

1. Estimating the price that consumers would be willing to pay 2. Working backward through markups taken by retailers and wholesalers 3. Adjust composition and features of the product to achieve the target price to consumers

Question 76

4 Approaches to selecting price level

Question 77

Target profit pricing

Answer 77

Setting an annual target of a specific dollar volume of profit

Question 78

Geographical Pricing

Question 79

Target Return on investment pricing

Question 80

Loss leader pricing

Question 81

Target return on sales pricing

Question 82

Multiple zone pricing

Question 83

Trade-in Allowance

Question 84

Non-Cumulative Quantity Discount

Question 85

Uniform delivered pricing

Answer 85

Includes all transportation costs

Question 86

Odd-even pricing (aka odd pricing)

Answer 86

Setting prices a few dollars or cent under an even number ($189.99)

Question 87

Yield Management Pricing

Answer 87

Changing of different prices to maximize revenue for a set amount of capacity at any given time

Question 88

Penetration Pricing

Answer 88

The opposite of Skimming Pricing Setting a low initial price on a new product to appeal immediately to the mass market

Question 89

Determinants of Elasticity

Answer 89

* Availability of substitutes * Role as a complement to another product * Whether product is perceived as a necessity * Whether product is perceived as a luxury * Portion of a person’s budget spent on an item * Consumers’ time perspective

Question 90

Relationship between Elasticity and Revenue/Profit

Answer 90

* Price cuts will increase revenues for products with elastic demand * Price increases will increase revenue for products with inelastic demand

Question 91

Left Digit Effect