BEE1034 Week 4
Pricing Decisions,
with Simple and Complex Costs
Slides based on material from Managerial Economics: A Problem Solving Approach (2 nd Edition)
Luke M. Froeb,
Brian T. McCann,
Website, managerialecon.com
© 2010 Cengage Learning and University of Exeter Business School. All Rights Reserved. May not be copied,
scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
, Introduction
• So far we have focused on how to vary quantity produced
in order to increase profit.
• Now we will look at setting prices to maximise profit.
• Pricing is an extent decision. It has an effect on both
marginal revenue and marginal cost, hence profits.
• In business, you may have a good idea of your current
marginal costs, but you may not know how costs will
change at different output levels.
• The same holds for marginal revenue.
• This week we will discuss various ways of estimating
both, and hence setting prices more effectively.
, Motivation: The Tesla Roadster 2.5
Pricing Decisions,
with Simple and Complex Costs
Slides based on material from Managerial Economics: A Problem Solving Approach (2 nd Edition)
Luke M. Froeb,
Brian T. McCann,
Website, managerialecon.com
© 2010 Cengage Learning and University of Exeter Business School. All Rights Reserved. May not be copied,
scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
, Introduction
• So far we have focused on how to vary quantity produced
in order to increase profit.
• Now we will look at setting prices to maximise profit.
• Pricing is an extent decision. It has an effect on both
marginal revenue and marginal cost, hence profits.
• In business, you may have a good idea of your current
marginal costs, but you may not know how costs will
change at different output levels.
• The same holds for marginal revenue.
• This week we will discuss various ways of estimating
both, and hence setting prices more effectively.
, Motivation: The Tesla Roadster 2.5
