Price by lanyuehua



   By: Christopher
Importance of cost and price

  Costs are the expenses of a firm; the
   money which the firm has to pay for
  Price is the amount customers are
   charged for products
Factors for pricing
  Customers - Lowering the price of a product
   increases customer demand but if the price is
   too low, customers might assume it is made
   with low quality
  Competitors - A business takes into account
   the price charged by rival organisations,
   particularly in competitive markets
  Costs - A business can make a profit only if
   the price charged eventually covers the costs
   of making an item
Loss leader

  There are times when businesses are
   willing to set price below unit cost. They
   use this loss leader strategy to gain
   sales and market share
  A loss leader’s price is extremely low to
   attract customers to acknowledge other
   products of that company
Pricing Strategy
    Penetration pricing means setting a relatively low
     price to boost sales
    Price skimming means setting a relatively high price
     to boost profits before other competitors come in the
    Cost plus pricing is when firm add a certain amount
     of percentage to the cost of production
    Competitive pricing occurs when a firm decides its
     own price based on that charged by rivals
    Predatory pricing to set a very low price for the
     business products to knock out all of their competitors
Average Fixed cost

  Average fixed costs (AFC) are
   calculated by dividing total fixed costs by
   the level of output
  AFC + AVC = AC
Average Variable Cost

  Average variable costs (AVC) are
   calculated by dividing total variable costs
   by the level of output
  AFC + AVC = AC
Break-even chart
  In order to have an accurate break-even chart, three lines
   must be plotted:
  Total Fixed Costs (TFC)
  Total Costs (TC)
  Total Revenue (TR)

    The x-axis is labelled as 'Output' (in units).
    The y-axis is labelled as 'Costs, Revenue and Profit' (in £ )

  Elasticity is the ratio of the percent change in
   one variable to the percent change in another
  Price elasticity of demand measures the
   percentage change in quantity demanded
   caused by a percent change in price
  The price elasticity of supply measures how
   the amount of a good firms wish to supply
   changes in response to a change in price
  Inelasticity is when the supply and demand
   for a good are unaffected when the price
   of that good or service changes
  An example of perfectly inelastic demand
   would be a life saving drug that people will pay
   any price to obtain. Even if the price of the
   drug were to increase dramatically, the
   quantity demanded would remain the same


To top