Pricing Strategies and Concepts

These flashcards cover key concepts, terms, and definitions related to pricing strategies, pricing practices, and concepts of price elasticity.

Price Elasticity of Demand

Measure of the sensitivity of demand to changes in price; it indicates how quantity demanded changes with price changes.

Breakeven Point

The point at which total costs equal total revenue, helping businesses understand when they will start making a profit.

Everyday Low Pricing (EDLP) Strategy

A pricing strategy where products are consistently priced at a low level without sales promotions.

High/Low Pricing Strategy

A strategy that relies on sales promotions to temporarily reduce prices and attract customers looking for bargains.

Market Penetration Pricing

Setting a price below competing brands in order to quickly gain market share.

Price Skimming

Charging the highest possible price that consumers are willing to pay for a new product.

Variable Cost

Costs that vary with the amount of production or sales volume.

Fixed Cost

Costs that do not change with the level of production or sales volume.

Deceptive Pricing Practices

Unethical or illegal pricing tactics such as deceptive reference pricing or bait and switch.

Monopoly

A market structure where one firm controls the market, leading to less price competition.

Oligopolistic Competition

A market structure dominated by a small number of firms, leading to more price competition among them.

Monopolistic Competition

A market structure with many firms selling differentiated products at different prices.

Pure Competition

A market structure where many firms sell identical products at market-determined prices.

Loss-Leader Pricing

A tactic where retailers price a product below cost to attract customers to the store.

Price Discrimination

Charging different prices to different consumers for the same product, which can be illegal.

Horizontal Price Fixing

An illegal agreement between competitors to set prices at a certain level to eliminate competition.

Vertical Price Fixing

A legal practice where manufacturers set the price at which retailers must sell their products.

Substitution Effect

The ability of consumers to replace one product with another when prices change.

Complementary Products

Products that are typically purchased together, where a price change in one affects the demand for the other.