Module 9 - Module 9 Topic 15 Pricing Concepts Reading...

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Module 9 Topic 15: Pricing Concepts Reading: Chapter 18 Price: Exchange value of a good or service. Robinson-Patman Act: Federal legislation prohibiting price discrimination note based on a cost differential; also prohibits selling at an unreasonably low price to eliminate competition. Unfair-trade laws: State laws requiring sellers to maintain minimum prices for comparable merchandise. Fair-trade laws: Statutes enacted in most states that once permitted manufacturers to stipulate a minimum retail price for their product. Marginal analysis: Method of analyzing the relationship among costs, sales price, and increased sales volume. Profit maximization: Point of which the additional revenue gained by increasing the price of a product equals the increase in total costs. Target-return objective: Short-run or long-run pricing objectives of achieving a specified return on either sales or investment. Market-share objective: Volume-related pricing objective with the goal of controlling a portion of the market for a firm’s product. Product impact of market strategies (PIMS) project: Research that discovered a strong positive relationship between a firm’s market share and product quality and its return on investment. Value pricing: Pricing strategy that emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings. Customary prices: Traditional prices that customers expect to pay for certain goods and services. Demand: Schedule of the amounts of a firm’s product that consumers will purchase at different prices during a specified time period. Supply: Schedule of the amounts of a good or service that firms will offer for sale at different prices during a specified time period. Pure competition: Market structure characterized by homogenous products in which there are so many buyers and sellers that none has a significant influence on price. Monopolistic competition: Market structure involving a heterogeneous product and product differentiation among competing suppliers, allowing the marketer some degree of control over prices. Oligopoly: Market structure in which relatively few sellers compete and where high start-up costs form barriers to keep out new competitors. Monopoly: Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes.
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Variable cost: Cost that changes with the level of production (such as labor and raw materials costs). Fixed cost: Cost that remains stable at any production level within a certain range (such as a lease payment or insurance cost) Average total cost: Cost calculated by dividing the sum of the variable and fixed costs by the number of units produced. Marginal cost: Change in total cost that results from producing an additional unit of output.
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