2.2.2 Price

• Cost-plus pricing involves adding a markup to the cost of production
• Which pricing strategy involves setting high prices to convey exclusivity?

  Premium pricing
• What do businesses compare to determine competitive prices?

  Rival business prices
• What must businesses balance to set effective prices?

  Customers, costs, profit
• What is a potential disadvantage of competitive pricing?

  Could lead to price wars
• Competitor prices help a business remain competitive.


  True
• Why is competitor pricing important for businesses?

  To remain competitive
• What is the definition of price in a business context?

  The amount charged for a product or service
• What determines the maximum price the market will bear?

  Customer demand
• Inelastic demand allows businesses to increase total revenue
• Customer demand determines the maximum price the market will bear
• The perceived value of a product or service enhances customer satisfaction
• Cost-plus pricing involves adding a markup to the cost of production
• What does price elasticity of demand measure?

  Responsiveness to price changes
• What happens to total revenue in unit elastic demand when prices change?

  Remains constant
• What can strong competition undermine in premium pricing?

  Exclusivity
• Anti-trust laws maintain fair market competition by prohibiting collusion and price fixing.

  True
• What is competitive pricing based on?

  Competitors' offerings
• Match the pricing method with its key characteristic:

  Cost-plus pricing ↔️ Ensures profitability

  Competitive pricing ↔️ Attracts price-sensitive customers

  Value pricing ↔️ Enhances customer satisfaction

  Premium pricing ↔️ Increases profit margins
• Customer demand determines the maximum price a business can charge for a product or service.

  True
• Arrange the following pricing strategies from lowest to highest perceived value:

  1️⃣ Cost-plus pricing

  2️⃣ Competitive pricing

  3️⃣ Value pricing

  4️⃣ Premium pricing
• Premium pricing reinforces brand image but may limit market share
• Customer demand determines the maximum price the market will bear.
• Profit margins directly affect a business's overall profitability and financial sustainability
• Match the pricing strategy with its description:

  Cost-plus pricing ↔️ Adding a markup to the cost of production

  Competitive pricing ↔️ Setting prices based on competitors

  Value pricing ↔️ Pricing based on perceived value

  Premium pricing ↔️ Setting high prices for exclusivity
• Price elasticity of demand measures how responsive customer demand is to price changes


  True
• What is added to the cost of production in cost-plus pricing?

  Markup
• What type of pricing requires thorough market research?

  Value pricing
• Premium pricing reinforces brand image but may limit market share.


  True
• Competitive pricing is based on what competitors charge for similar products.


  True
• Elastic demand means demand is highly responsive to price changes
• In cost-plus pricing, competition may make it difficult to pass on cost increases
• Laws like the Consumer Rights Act prohibit businesses from providing false or misleading information about prices
• What is the definition of price in business terms?

  Amount charged for product
• Value pricing is based on the perceived value of the product or service by customers.


  True
• The total cost incurred by a business to produce a product or service is called the cost of production
• The difference between the selling price and the cost of production is known as the profit margin
• Cost-plus pricing ensures profitability but may not be competitive.

  True
• The cost of production is a key factor affecting pricing decisions.


  True
• What does profit margin affect for a business?

  Financial sustainability