07 Pricing Strategies continued

# 07 Pricing Strategies continued - Pricing Strategies...

• Notes
• 1

This preview shows page 1. Sign up to view the full content.

Pricing Strategies Keeping pace: (WSJ) - innovative styles like its Cinco de Mayo shoe (right) create this kind of buzz that has kept Nike hip as its sales rise - hip, counter culture, cartoons, tattoo artists Estimating Demand and Revenue - demand curve = average revenue curve - marginal revenue curve: how much additional revenue you get per sale - P x Q = TR; price x quantity = total revenue - Total revenue starts at 0, peaks at some point, and then decreases o Why does it go down?: price goes down to induce them to buy more less revenue; at \$1, 10 buyers, \$10 revenue, at \$5, 5 buyers, \$25 buyers - Demand: downward sloping - Elasticity: %∆Q/%∆P; as I decrease/increase price, how much is quantity to increase? o Elasticity can be elastic (greater than 1) or inelastic (less than one)
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: What products are elastic? • Products with substitutes Inelastic? • Products with less substitutes • Products you don’t use often Adding costs-marginal cost decreases as quantity increases (get better at making it), then increases because of diminishing returns in productivity-marginal revenue???-Ask Julie/Mike for graphs-Profit max is when MC = MR, why? Isn’t that a net of 0? Break even Analysis-puts TC and TR together to determine profitability at different output levels -BEP (break even point) = Fixed cost/price - variable cost = quantity you must sell to break even-P = [fixed cost + (variable cost x quantity)]/quantity o Algebraic manipulation of BEP equation---how did he get this equation?-Example:...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern