The Pricing Decision And Customer Profitability Analysis

Question 1

What are the factors that influence the pricing decision?

Answer 1

Cost of goods sold
Operating cost structure
Nature of the product or service
Competitiveness of the industry
Sensitivity to global issues
Legal and environmental issues
Price elasticity

Question 2

What is price elasticity of demand

Answer 2

Refers to the relationship between price and demand. It measures the relationship between a change in price and a change in demand for a product or service

Question 3

If the numerical value is less than or equal to one, then the price elasticity is…

Answer 3

Inelastic (demand is less sensitive to changes in price)

Question 4

If the numerical value is greater than or equal to one, then price elasticity is…

Answer 4

Elastic (demand is sensitive to changes in price)

Question 5

What is the formulae for price elasticity?

Answer 5

Percentage change in demand/ Percentage change in price