Edexcel A Level Business: Paper 3 (Advanced Information) A+

price elasticity of demand - a measure of the sensitivity of demand to changes in price Competitive Pricing - When the product is priced in line with or just below competitors' prices to try to capture more of the market. Cost Plus Pricing - adding a percentage (the mark-up) to the costs of producing a product to get the price. Mark-Up - The percentage added to unit cost that makes a profit for a business when setting the price Penetration Pricing - setting a low initial price on a new product to appeal immediately to the mass market and get established in the market. Prices might be raised once established. Predatory Pricing - selling a product below cost to drive competitors out of the market Pricing Strategy - The pricing policies or methods used by a business when deciding what to charge for its products Product Life Cycle - describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline and the sales that can be expected at each stage. pyschological pricing - pricing goods and services at price points that make the product appear less expensive than it is e.g. £9.99 Price Skimming - Charging the highest possible price that buyers who most desire the product will pay before lowering the price at a later date. Unit Costs - The same as average cost (total cost divided by output) Competitive Market - a market in which there are many buyers and many sellers so that each has a negligible impact on the market price Inelastic Demand - A situation in which an increase or a decrease in price will not significantly affect demand for the product. It has a value of less than 1 e.g. -0.8 Elastic Demand - Goods for which changes in price have large effects on the amount demanded. They hold a value of more than 1 e.g. -2.5 Necessity - A good or service that is viewed by consumers as a high priority. Consumers tend to be less sensitive to price changes of goods that are assumed to be necessities. USP - A feature of a product or service that allows it to be differentiated from other products in the market Differentiation - The extent to which consumers view your product or service as being different from those of competitors within the market e.g. branding Price Leadership - one firm sets its price first, and other firms then follow Dynamic Pricing - the practice of changing prices for products and services in real time in response to supply and demand conditions. It is often used by the likes of hotels and airlines to reflect demand. Auction Sites - Web-based businesses offering participants the ability to list products for consumer bidding for a fee.