Edexcel A Level Business: Paper 3
(Advanced Information)
price elasticity of demand - ANSWER a measure of the sensitivity of demand to changes in
price
Competitive Pricing - ANSWER When the product is priced in line with or just below
competitors' prices to try to capture more of the market.
Cost Plus Pricing - ANSWER adding a percentage (the mark-up) to the costs of producing a
product to get the price.
Mark-Up - ANSWER The percentage added to unit cost that makes a profit for a business
when setting the price
Penetration Pricing - ANSWER 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 - ANSWER selling a product below cost to drive competitors out of the
market
Pricing Strategy - ANSWER The pricing policies or methods used by a business when
deciding what to charge for its products
, Product Life Cycle - ANSWER 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 - ANSWER pricing goods and services at price points that make the
product appear less expensive than it is e.g. £9.99
Price Skimming - ANSWER Charging the highest possible price that buyers who most desire
the product will pay before lowering the price at a later date.
Unit Costs - ANSWER The same as average cost (total cost divided by output)
Competitive Market - ANSWER a market in which there are many buyers and many sellers so
that each has a negligible impact on the market price
Inelastic Demand - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER A feature of a product or service that allows it to be differentiated from
other products in the market
(Advanced Information)
price elasticity of demand - ANSWER a measure of the sensitivity of demand to changes in
price
Competitive Pricing - ANSWER When the product is priced in line with or just below
competitors' prices to try to capture more of the market.
Cost Plus Pricing - ANSWER adding a percentage (the mark-up) to the costs of producing a
product to get the price.
Mark-Up - ANSWER The percentage added to unit cost that makes a profit for a business
when setting the price
Penetration Pricing - ANSWER 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 - ANSWER selling a product below cost to drive competitors out of the
market
Pricing Strategy - ANSWER The pricing policies or methods used by a business when
deciding what to charge for its products
, Product Life Cycle - ANSWER 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 - ANSWER pricing goods and services at price points that make the
product appear less expensive than it is e.g. £9.99
Price Skimming - ANSWER Charging the highest possible price that buyers who most desire
the product will pay before lowering the price at a later date.
Unit Costs - ANSWER The same as average cost (total cost divided by output)
Competitive Market - ANSWER a market in which there are many buyers and many sellers so
that each has a negligible impact on the market price
Inelastic Demand - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER A feature of a product or service that allows it to be differentiated from
other products in the market
