MKT 300 EXAM 4 EATON QUESTIONS
Price - Answers -what you pay for something; value you exchange for the benefits of
having or using the product/service
Value = - Answers -Benefits - Costs
Internal Factors that affect pricing decisions - Answers -Marketing Objectives:
maximize profit or gain market share
Marketing Mix Strategy: price needs to be consistent with other 3P's
Costs: set optimal price
External factors that affect pricing decisions - Answers -Demand for your product
Competition: competitor's price & strength of competition
Economy: cost of components (natural resources) and economic conditions
Price elasticity - Answers -how much the demand for a product will change with a
change in price
E (elasticity) = - Answers -(% change in quantity demanded for good A) / (% change in
price of good A)
Elastic - Answers -consumers buy more or less of a product when the price changes
Inelastic - Answers -an increase or decrease in price will not significantly affect demand
Unitary elasticity - Answers -an increase in sales exactly offsets a decrease in prices,
and revenue is unchanged
Products that are price sensitive, have many substitutes, and relatively small decreases
in price result in large increases in quantity demanded are price:
a. elastic
b. inelastic - Answers -elastic (E is greater than 1.0)
Products that are less price-sensitive, have few substitutes, and large increases in price
result in only a small decrease in quantity demanded are:
a. elastic
b. inelastic - Answers -inelastic (E is less than 1.0)
When demand is elastic, price goes _______ and revenue goes _______. - Answers -
up, down
, and
down, up
When demand is inelastic, price goes _______ and revenue goes _______. - Answers
-up, up
and
down, down
When demand is unitary elasticity, price goes _______ and revenue goes _______. -
Answers -up or down, stays the same
If demand for a good is extremely elastic, raising the price of that good typically has
what effect on total revenue? - Answers -decreases
stages for establishing prices - Answers -1. Development of pricing objectives
2. Assessment of target market's evaluation of price
3. Evaluation of competitors' prices
4. Selection of a basis for pricing
5. Selection of a pricing strategy
6. Determination of a specific price
Profit - Answers -identify price and cost levels that allow the firm to maximize profit per
product
status quo - Answers -identify price levels similar to competitor average price
market share - Answers -adjust price levels so that the firm can maintain or increase
sales relative to competitors' sales
assess target market's evaluation of price: importance of price - Answers -type of
product, type of target market, purchase situation
evaluate competitors' price - Answers -sources of competitors' pricing info: comparative
shoppers
importance of knowing competitors' prices: helps to know how important price is to
customers and helps marketers in setting competitive prices for their products
customer view of pricing and marketing: pricing above/below competition
adjusting your price levels so that your company can maintain or increase sales relative
to competitors' sales best described with pricing objective? - Answers -market share
Select a basis for pricing: cost
cost-plus pricing - Answers -adding a specified dollar amount to the seller's cost
Price - Answers -what you pay for something; value you exchange for the benefits of
having or using the product/service
Value = - Answers -Benefits - Costs
Internal Factors that affect pricing decisions - Answers -Marketing Objectives:
maximize profit or gain market share
Marketing Mix Strategy: price needs to be consistent with other 3P's
Costs: set optimal price
External factors that affect pricing decisions - Answers -Demand for your product
Competition: competitor's price & strength of competition
Economy: cost of components (natural resources) and economic conditions
Price elasticity - Answers -how much the demand for a product will change with a
change in price
E (elasticity) = - Answers -(% change in quantity demanded for good A) / (% change in
price of good A)
Elastic - Answers -consumers buy more or less of a product when the price changes
Inelastic - Answers -an increase or decrease in price will not significantly affect demand
Unitary elasticity - Answers -an increase in sales exactly offsets a decrease in prices,
and revenue is unchanged
Products that are price sensitive, have many substitutes, and relatively small decreases
in price result in large increases in quantity demanded are price:
a. elastic
b. inelastic - Answers -elastic (E is greater than 1.0)
Products that are less price-sensitive, have few substitutes, and large increases in price
result in only a small decrease in quantity demanded are:
a. elastic
b. inelastic - Answers -inelastic (E is less than 1.0)
When demand is elastic, price goes _______ and revenue goes _______. - Answers -
up, down
, and
down, up
When demand is inelastic, price goes _______ and revenue goes _______. - Answers
-up, up
and
down, down
When demand is unitary elasticity, price goes _______ and revenue goes _______. -
Answers -up or down, stays the same
If demand for a good is extremely elastic, raising the price of that good typically has
what effect on total revenue? - Answers -decreases
stages for establishing prices - Answers -1. Development of pricing objectives
2. Assessment of target market's evaluation of price
3. Evaluation of competitors' prices
4. Selection of a basis for pricing
5. Selection of a pricing strategy
6. Determination of a specific price
Profit - Answers -identify price and cost levels that allow the firm to maximize profit per
product
status quo - Answers -identify price levels similar to competitor average price
market share - Answers -adjust price levels so that the firm can maintain or increase
sales relative to competitors' sales
assess target market's evaluation of price: importance of price - Answers -type of
product, type of target market, purchase situation
evaluate competitors' price - Answers -sources of competitors' pricing info: comparative
shoppers
importance of knowing competitors' prices: helps to know how important price is to
customers and helps marketers in setting competitive prices for their products
customer view of pricing and marketing: pricing above/below competition
adjusting your price levels so that your company can maintain or increase sales relative
to competitors' sales best described with pricing objective? - Answers -market share
Select a basis for pricing: cost
cost-plus pricing - Answers -adding a specified dollar amount to the seller's cost
