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TR Chapter 18 - Chapter 18 Price Concepts Price and...

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Copyright © 2007 by Nelson, a division of Thomson Canada Limited Chapter 18 Chapter 18 Price Concepts Price Concepts and Approaches and Approaches
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18- Copyright © 2007 by Nelson, a division of Thomson Canada Limited Chapter Objectives Chapter Objectives 1. Outline the legal constraints on pricing. 2. Identify the major categories of pricing objectives. 3. Explain price elasticity and its determinants. 4. List the practical problems involved in applying price theory concepts to actual pricing decisions. 5. Explain the major cost-plus approaches to price setting. 6. List the chief advantages and shortcomings of using breakeven analysis in pricing decisions. 7. Explain the superiority of modified breakeven analysis over the basic breakeven model and the role of yield management in pricing decisions. 8. Identify the major pricing challenges facing online and international marketers.
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18- Copyright © 2007 by Nelson, a division of Thomson Canada Limited Pricing and the Law Pricing and the Law Price Price : the exchange value of a good or service Competition Act Competition Act Federal legislation prohibiting price discrimination, price fixing, bid rigging, predatory pricing, false or misleading ordinary selling price representations, and other anti- competitive practices
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18- Copyright © 2007 by Nelson, a division of Thomson Canada Limited Pricing Objectives and the Pricing Objectives and the Marketing Mix Marketing Mix Prices, and the resulting sales, determine how much revenue a company receives Prices thus influence a firm’s profits Prices also influence the firm’s employment of the factors of production: Natural resources Capital Human Resources Entrepreneurship
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18- Copyright © 2007 by Nelson, a division of Thomson Canada Limited Profitability Objectives Profitability Objectives For-profit firms must set prices with profitability in mind Profit Maximization : point at which the additional revenue gained by increasing the price of a product equals the increase in total costs Target-Return Objectives : Short-run or long-run pricing objectives of achieving a specified return on either sales or investment
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18- Copyright © 2007 by Nelson, a division of Thomson Canada Limited Volume Objectives Volume Objectives Sales maximization : A minimum profit level is set and firms seek to maximizes sales Market-share objectives : the goal set for controlling a portion of the market for a firm’s good or service
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