Economics 10

  • Created by: Gabrielle
  • Created on: 30-12-13 11:52
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  • Pricing Strategies
    • Cost Plus
      • calculate cost of production per unit and set price above this cost
    • Psychological pricing
      • based on assumption consumers do not behave rationally, e.g. £0.99 vs £1
    • Penetration pricing
      • –price set to penetrate the market – encourage volume sales
    • predatory pricing
      • price set to drive out competition
    • Loss leader
      • price set below cost to encourage sales of other products
    • Premium or value pricing
      • price set to reflect exclusivity on low volume high margin products
    • Competition pricing
      • price set in relation to rival sellers
    • Price leadership
      • where a firm is dominant in a market
    • Marginal cost pricing
      • price based on marginal cost
    • Under perfect competition, firms cannot influence price
    • Under imperfect competition, firms can set the price
    • A monopoly faces a downward sloping demand curve
    • Firms in competitive markets face a horizontal demand curve
    • Price discrimination is the business practice of selling the same good at different prices to different customers


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