Pricing Terminology (10)

Question 1

a _______ is what is being charged or exchanged for a product or service

Answer 1

price

Question 2

What is price?

Answer 2

what is being charged or exchanged for a product or service

Question 3

What is value?

Answer 3

What a product or service is worth to a consumer, or the maximum amount a consumer would pay

Question 4

Value is what a product or service is ______ to a consumer

Answer 4

worth

Question 5

Price is what is being ______ or exchanged for a product or service

Answer 5

charged

Question 6

What are fixed costs?

Answer 6

costs associated with the operating and marketing expenses of a company

Question 7

Fixed costs are costs associated with…

Answer 7

the operating and marketing expenses of a company

Question 8

Fixed costs are the costs associated with the _______ and _______ expenses of a company

Answer 8

operating, marketing

Question 9

Do fixed costs change with the number of products sold?

Answer 9

No

Question 10

an example of this type of cost is the cost of renting a warehouse to store product

Answer 10

fixed costs

Question 11

Fixed costs ____ ____ over the number of units sold

Answer 11

spread out

Question 12

What are variable costs?

Answer 12

the per-unit costs associated with the product.

Question 13

the per-unit costs associated with the product are called…

Answer 13

variable costs

Question 14

what is an example of variable costs?

Answer 14

the cost of material to make the product. If it costs $1 in material to make a widget, then it costs the company $1 in variable costs each time it produces a widget.

Question 15

the breakeven point for a product is…

Answer 15

the point at which revenues equal expenses

Question 16

what is a breakeven quantity?

Answer 16

A breakeven quantity is the quantity the company needs to sell at a certain price in order to cover fixed costs.

Question 17

A breakeven quantity is the quantity the company needs to ______ at a certain price in order to cover ______ costs.

Answer 17

sell, fixed

Question 18

Thr breakeven price is the amount…

Answer 18

the amount a marketer needs to price a product in order to cover expenses at a certain quantity sold.

Question 19

The amount a marketer needs to price a product in order to cover expenses at a certain quantitiy sold is called…

Answer 19

breakeven price

Question 21

the quantity the company needs to sell at a certain price in order to cover fixed costs is called…

Answer 21

breakeven quantity

Question 22

What is the first step to developing a pricing structure?

Answer 22

how there particular industry behaves with prices

Question 23

What are the two general types of industries for pricing?

Answer 23

dumb industry

price industry

Question 24

What happens in a dumb industry?

Answer 24

companies tend to compete for price

Question 25

In a dumb industry companies...

Answer 25

tend to compete for price

Question 26

What is a company’s main strategy for winning customers in a dumb industry?

Answer 26

its main differentiator is to simply have the lowest price.

Question 27

Competition for the lowest priced product is called...

Answer 27

price wars

Question 28

what is a "price sensitive" customer greatly influecned by?

Answer 28

the price of the product

Question 29

In which price market do you find price senstive buyers?

Answer 29

dumb

Question 30

Dumb markets lead to...

Answer 30

price sensitive customers and price wars

Question 31

price sensitivity means that...

Answer 31

purchases are greatly influenced by the price of the product

Question 32

What happens in a smart industry?

Answer 32

In a smart industry, companies tend to use more complex pricing structures and use more pricing options.

Question 33

Is there less or more head-to head competition with price in a smart market?

Answer 33

less

Question 34

Customers buying in a smart market are usually _____ price sensitive

Answer 34

less

Question 35

What is price elasticity?

Answer 35

the change in demand in a market in response to a product’s change in price.

Question 36

the change in demand in a market in response to a product’s change in price is called...

Answer 36

price elasticity

Question 37

Price elasticity is the change in ______ in a market in response to a product’s change in \_\_\_\_\_.

Answer 37

demand, price

Question 38

A market is considered elastic if....

Answer 38

a change in price produces a substantial change in demand.

Question 39

a market is inelastic if...

Answer 39

a change in prices results in little to no change in demand.

Question 40

When a change in prices results in little to no change in demand this is called...

Answer 40

an inelastic market

Question 41

whan a market is inelastic a change in _____ results in ____ change in demand.

Answer 41

little

Question 42

when a market is elastic a change in prices results in ______ change in demand.

Answer 42

substantial

Question 43

Fill in the blanks

Answer 43

1. inelastic 2. elastic 3. inelastic 4. elastic

Question 44

How is price elasticity calculated?

Answer 44

% of change in quantity sold / % change in price

Question 45

A price elasticity calculation of \< -1 is considered \_\_\_\_\_\_

Answer 45

elastic For example, let’s say the price of a widget is $5, and the marketer increases the price by 20% to $6. As a result, the quantity sold (demand) falls from 100 units to 50 units, or the quantity changes by -50%. The calculation for this is: -50% / 20% PE = -2.5 This amount is LESS THAN -1. Therefore, the price is elastic.

Question 46

A price elasticity calculation of \> -1 is considered \_\_\_\_\_\_

Answer 46

elastic

Question 47

if a marketer sells a product in a market that is price inelastic, then...

Answer 47

the marketer can adjust the price upward without it affecting demand as much. If prices increase and demand stays the same, this means the overall profits will increase. However, a marketer cannot increase prices infinitely without it eventually having a negative impact on the company.

Question 48

if prices increase and demand stays the same, this means the overall profits will \_\_\_\_\_.

Answer 48

increase However, a marketer cannot increase prices infinitely without it eventually having a negative impact on the company.

Question 49

if a marketer sells a product in a market that is price elastic, then...

Answer 49

price increases will result in a significant decrease in demand, decreasing overall profits.

Question 50

what is an industry example of an inelastic market?

Answer 50

cigarette sales price elasticity in cigarette sales has been found to be between -.3 and -.6 overall. That is considered to be an inelastic price elasticity for demand, meaning that as cigarette prices increase, demand does not decrease very much.

Question 51

what is an industry example of an elastic market?

Answer 51

leisure airline travel leisure airline travel in the US has a price elasticity of approximately -1.5, which is elastic. This means that as airline ticket prices increase, demand for plane tickets for leisure travel decreases.