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25 Cards in this Set
- Front
- Back
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Price
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some unit of value given up by one party in return for something from another party
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Elasticity of demand
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the relationship between changes in price and quantities sold
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Break-even analysis (BEA)
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a standard analysis technique that literally means to have zero profit. It is the point at which total cost and total revenue are equal. Break-even sales= Fixed costs/ (selling price- variable costs)
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Demand schedules
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provide a systematic look at the relationship between price and quantity sold
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Elasticity coefficient
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the absolute value of the percentage change in quantity divided by the percentage change in price
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Inelastic demand
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reflected by an elasticity coefficient of less than 1
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Elastic demand
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reflected by an elasticity coefficient of more than 1
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Unitary elasticity
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means that the coefficient is exactly equal to 1
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Marginal revenues
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changes in a firms total revenue per unit change in its sales level
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Marginal costs
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the changes in a firms total costs per unit in its output level
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ROI
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the percentage of the dollar profit generated by each dollar invested in the business
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Theory of dual entitlement
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holds that consumers believe there are terms in a transaction to which both consumers and sellers are entitled over time
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Market (price) skimming
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a strategy of pricing the new product at a relatively high level and then gradually reducing it over time
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Penetration strategy
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requires that a firm enter the market at a relatively low price in an attempt to obtain market share and expand demand for its product
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Price shading
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occurs when, during negotiation, a salesperson reduces the base price of a product
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Free on-board (FOB) pricing
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leaves the cost and responsibility of transportation to the customer
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Uniform delivered pricing
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means that the seller charges al customers the same transportation cost regardless of their location
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Price promotions
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short-term price reductions designed to create an incentive for consumers to buy now rather than later and/or stock up on the product
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Everyday low pricing (EDLP)
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refers to the pricing strategy in which a firm charges the same low price every day
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Price-fixing
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is a conspiracy to fix competitive prices; it restricts competition and leads to higher prices for customers
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Sherman Antitrust Act
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prohibits any contract, combination, or conspiracy that restricts trade
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Cartels
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organizations of firms in an industry where the central organization makes certain management decisions and carries out functions that would normally be performed with the individual firms
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Price discrimination
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occurs when a seller offers a lower price to some buyers than it does to other buyers
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Predatory pricing
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a practice where one firm attempts to drive out rivals by pricing at such a low level that a rival cannot make any money
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Markup laws
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state laws that require a certain markup above cost in particular industries to protect consumers and small businesses from predatory pricing
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