MARK 3000: Grantham Exam 3 Test
Questions All Answers Solved Correct.
Price - Answer The overall sacrifice a consumer is willing to make -money, time, energy- to
acquire a specific product or service.
Profit Oriented - Answer A company objective that can be implemented by focusing on target
profit pricing, maximizing profits, or target return pricing.
Target Profit Pricing - Answer A pricing strategy implemented by firms when they have a
particular profit goal as their overriding concern; uses price to stimulate a certain level of sales
at a certain profit per unit.
Maximizing Profits - Answer A profit strategy that relies primarily on economic theory. If a firm
can accurately specify a mathematical model that captures all the factors required to explain
and predict sales and profits, it should be able to identify the price at which its profits are
maximized.
Target Return Pricing - Answer A pricing strategy implemented by firms less concerned with
the absolute level of profits and more interested in the rate at which their profits are generated
relative to their investments; designed to produce a specific return on investment, usually
expressed as a percentage of sales.
Sales Orientation - Answer A company objective based on the belief that increasing sales will
help the firm more than will increasing profits.
Premium Pricing - Answer A competitor-based pricing method by which the firm deliberately
prices a product above the prices set for competing products to capture those consumers who
always shop for the best or for whom price does not matter.
Competitor Orientation - Answer A company objective based on the premise that the firm
should measure itself primarily against its competition.
Competitive Parity - Answer A firm's strategy of setting prices that are similar to those of
major competitors.
, Customer Orientation - Answer A company objective based on the premise that the firm
should measure itself primarily according to whether it meets its customer's needs.
Demand Curve - Answer Shows how many units of a product or service consumers will
demand during a specific period at different prices.
Prestige Products or Services - Answer Those that consumers purchase for status rather than
functionality.
Price Elasticity of Demand - Answer Measures how changes in a price affect the quantity of
the product demanded; Specifically, the ratio of the percentage change in quantity demanded
to the percentage change in price.
Price Elasticity of Demand Function - Answer Elasticity= (% Change in Quantity Demanded)/ (%
Change in Price)
Elastic - Answer Refers to a market for a product or service that is price sensitive; that is,
relatively small changes in price will generate fairly large changes in the quantity demanded.
Inelastic - Answer Refers to a market for a product or service that is price insensitive; That is,
relatively small changes in price will not generate large changes in the quantity demanded.
Income Effect - Answer Refers to the change in the quantity of a product demanded by
consumers due to a change in their income.
Substitution Effect - Answer Refers to consumers' ability to substitute other products for the
focal brand, thus increasing the price elasticity of demand for the focal brand.
Cross-Price Elasticity - Answer The percentage change in demand for product A that occurs in
response to a percentage change in price of product B. (Complimentary Products)
Complementary Products - Answer Products whose demand curves are positively related,
such that they rise or fall together; A percentage increase in demand for one results in a
percentage increase in demand for the other.
Questions All Answers Solved Correct.
Price - Answer The overall sacrifice a consumer is willing to make -money, time, energy- to
acquire a specific product or service.
Profit Oriented - Answer A company objective that can be implemented by focusing on target
profit pricing, maximizing profits, or target return pricing.
Target Profit Pricing - Answer A pricing strategy implemented by firms when they have a
particular profit goal as their overriding concern; uses price to stimulate a certain level of sales
at a certain profit per unit.
Maximizing Profits - Answer A profit strategy that relies primarily on economic theory. If a firm
can accurately specify a mathematical model that captures all the factors required to explain
and predict sales and profits, it should be able to identify the price at which its profits are
maximized.
Target Return Pricing - Answer A pricing strategy implemented by firms less concerned with
the absolute level of profits and more interested in the rate at which their profits are generated
relative to their investments; designed to produce a specific return on investment, usually
expressed as a percentage of sales.
Sales Orientation - Answer A company objective based on the belief that increasing sales will
help the firm more than will increasing profits.
Premium Pricing - Answer A competitor-based pricing method by which the firm deliberately
prices a product above the prices set for competing products to capture those consumers who
always shop for the best or for whom price does not matter.
Competitor Orientation - Answer A company objective based on the premise that the firm
should measure itself primarily against its competition.
Competitive Parity - Answer A firm's strategy of setting prices that are similar to those of
major competitors.
, Customer Orientation - Answer A company objective based on the premise that the firm
should measure itself primarily according to whether it meets its customer's needs.
Demand Curve - Answer Shows how many units of a product or service consumers will
demand during a specific period at different prices.
Prestige Products or Services - Answer Those that consumers purchase for status rather than
functionality.
Price Elasticity of Demand - Answer Measures how changes in a price affect the quantity of
the product demanded; Specifically, the ratio of the percentage change in quantity demanded
to the percentage change in price.
Price Elasticity of Demand Function - Answer Elasticity= (% Change in Quantity Demanded)/ (%
Change in Price)
Elastic - Answer Refers to a market for a product or service that is price sensitive; that is,
relatively small changes in price will generate fairly large changes in the quantity demanded.
Inelastic - Answer Refers to a market for a product or service that is price insensitive; That is,
relatively small changes in price will not generate large changes in the quantity demanded.
Income Effect - Answer Refers to the change in the quantity of a product demanded by
consumers due to a change in their income.
Substitution Effect - Answer Refers to consumers' ability to substitute other products for the
focal brand, thus increasing the price elasticity of demand for the focal brand.
Cross-Price Elasticity - Answer The percentage change in demand for product A that occurs in
response to a percentage change in price of product B. (Complimentary Products)
Complementary Products - Answer Products whose demand curves are positively related,
such that they rise or fall together; A percentage increase in demand for one results in a
percentage increase in demand for the other.
