Psychological Pricing Pricing Strategies Loss Leaders Competitive Pricing Full-cost (absorption-cost) pricing Marginal-cost Pricing Predatory Pricing Creaming / skimming Cost-plus pricing Discrimination Pricing Premium Pricing Penetration Pricing Going-rate Pricing
What is meant by price elasticity of demand?  Exam questions The responsiveness for demand for a product when there is a change in price.
Price elasticity The percentage change in quantity demanded is greater than the percentage change in price Price P2 P1 D Q2 Q1 Quantity
Price inelasticity P1 P2 The percentage change in quantity demanded is less than the percentage change in price Price D Q1 Q2 Quantity
Price elasticity of demand PED is usually negative because a fall in price (-ve) usually results in a rise in demand (+ve) % ∆ QD % ∆ P • Calculate the % ∆ P • Calculate the % ∆ QD • Example: PED=10/25 = 0.4 If it is <1 is it negative
June 2005 paper 1 Jomo manages a small printing business. One of his customers asked Jomo to quote a price for a sales leaflet that they needed. Jomo investigated the costs of the order and his results are shown in Figure 1. Jomo add a 50% mark-up to the average cost per unit to calculate the selling price. $ Total cost 64,000 1. Do you think that the pricing method Jomo uses is the best one for his business? Explain your answer.  2. Suggest an alternative pricing method for Jomo to use. Justify your answer.  No of copies 10,000
Activity 27.7 Levis & Tesco Mark scheme – Attempt at evaluative comment in context, eg. Likely outcome if Tesco are allowed to sell Levi jeans. [11-12marks] Analysis of how Tesco’s pricing strategies could harm Levi’s reputation [8-10]marks] Shows a good understanding of the effects of different pricing strategies [3-7 marks] Show some understanding of the effects of different pricing strategies [1-2marks]
Homework – • Explain: • Income elasticity • Cross elasticity • Advertising elasticity • Use graphs to help you explain your answers. •