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  1. Price
    Price is that which is given up in an exchange to acquire a good or service.
  2. Revenue
    The price charged to customers multiplied by the number of units sold
  3. Profit
    Revenue minus expenses.
  4. Trends Influencing Price
    • Flood of new products
    • Increased availability of bargain-priced private
    • and generic brands
    • Price cutting as a strategy to maintain or
    • regain market share
    • Internet used for comparison shopping
  5. Profit-Oriented Pricing Objectives
    • Profit Maximization
    • Satisfactory Profits
    • Target Return on Investment
  6. Profit Maximization
    Setting prices so that total revenue is as large as possible relative to total costs.
  7. Return on Investment
    Net profit after taxes divided by total assets.
  8. Market Share
    A company’s product sales as a percentage of total sales for that industry.
  9. Demand
    The quantity of a product that will be sold in the market at various prices for a specified period.
  10. Supply
    The quantity of a product that will be offered to the market by a supplier at various prices for a specific period.
  11. Price Equilibrium
    The price at which demand and supply are equal.
  12. Elasticity of Demand
    Consumers’ responsiveness or sensitivity to changes in price.
  13. Elastic Demand
    Consumers buy more or less of a product when the price changes.
  14. Inelastic Demand
    • An increase or decrease in price will not significantly
    • affect demand.
  15. Unitary Elasticity
    An increase in sales exactly offsets a decrease in prices, and revenue is unchanged.
  16. Factors that Affect Elasticity of Demand
    • Availability of substitutes
    • Price relative to purchasing power
    • Product durability
    • A product’s other uses
    • Rate of inflation
  17. Yield Management Systems
    A technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity
  18. Methods Used to Set Prices
    • Markup pricing
    • Keystoning
    • Profit Maximization Pricing
    • Break-Even Pricing
  19. Markup Pricing
    The cost of buying the product from the producer plus amounts for profit and for expenses not otherwise accounted for.
  20. Keystoning
    The practice of marking up prices by 100%, or doubling the cost.
  21. Profit Maximization
    A method of setting prices that occurs when marginal revenue equals marginal cost.
  22. Marginal Revenue
    The extra revenue associated with selling an extra unit of output, or the change in total revenue with a one-unit change in output.
  23. Other Determinants of Price
    • Stages of the Product Life Cycle
    • Competition
    • Distribution Strategy
    • Promotion Strategy
    • Perceived Quality
  24. Selling against the brand
    Stocking well-known branded items at high prices in order to sell store brands at discounted prices.
  25. The Impact of the Internet
    • Product selection
    • Second opinions from expert sites
    • Shopping bots
    • Internet auctions
  26. Prestige Pricing
    Charging a high price to help promote a high-quality image.
  27. Dimensions of Quality
    • 1.Ease of use
    • 2.Versatility
    • 3.Durability
    • 4.Serviceability
    • 5.Performance
    • 6.Prestige
  28. Status quo pricing
    a ricing objective that maintatins existing prices or meets the competition's prices
  29. Variable cost
    a cost that varies with changes in the level of output
  30. fixed cost
    a cost that does not change as output is increased or decreased
  31. Average Variable cost (AVC)
    total variable costs divided by quantity of output
  32. average total cost (ATC)
    total cost divided by quantity of output
  33. marginal cost (MC)
    the change in total cost associated with a one-unit change in output
  34. break-even analysis
    a method of determining what sales volume must be reached before total revenue equals total costs
  35. extranet
    a private electronic network that links a company with its suppliers and customers
Card Set:
2011-06-21 02:27:25

Terms and important things from slides on Chapter 19
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