COMMERCE 2MA3 Study Guide - Final Guide: Geographical Pricing, Predatory Pricing, Unit Price
1 May 2016
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Document Summary
Price: the exchange value of a good or service. Prices are difficult to set and dynamic, they shift in response to a number of variables. Pricing objectives vary from firm to firm; and they can be classified into 4 major groups. Profitability objectives: consumers must be convinced they are receiving good value for their money. Intense competition results from competition for leadership position. Economic theory is based on two major assumptions: firms will behave rationally, and, that this behavior will result in an effort to maximize gains and minimize losses. Marginal analysis: method of analyzing the relationship among costs, sales price, and increased sales volume. A profit- maximizing price rises to the point at which further increases will cause disproportionate decreases in the number of units sold. Profit maximization: point at which the additional revenue gained by increasing the price of a product equals the increase in total costs.
