Answerstoexploringthewebexercises-FacStaffHomePageforCBU.doc

15 Pricing and Credit Decisions — CHAPTER 15 LECTURE NOTES 1 Discuss the role of cost and demand factors in setting a price. PPT 15-1 Chapter 15 Pricing and Credit Decisions PPT 15-2 Looking Ahead PPT 15-3/TM 15-3 Setting a Price PPT 15-4/TM 15-4 Price Changes Affect Revenues PPT 15-5 The Three Components of Total Cost in Determining Price [Acetate 15-5] PPT 15-6 Cost Determination for Pricing PPT 15-7 Cost Structure for a Hypothetical Firm, 2004 PPT 15-8 Cost Structure for a Hypothetical Firm, 2005 PPT 15-9 How Customer Demand Affects Pricing PPT 15-10 Pricing and a Firms Competitive Advantage Setting a price ( Definition of price: what the seller requires to transfer ownership or use of a product or service. Discuss credit and pricing. ( Bring out the importance of pricing by explaining the following two points: (1) one-half of one side of the revenue equation is price! (Sales × Price = Revenue) and (2) price has an indirect impact on quantity sold. Cost determination for pricing Emphasize that careful study of costs may keep a business from pricing too low. Review the behavior of total fixed and total variable costs. Explain the concept of average pricing and highlight its dangers. How customer demand affects pricing The Elasticity of demand (the effect of a change in price on quantity demanded) Elastic demand—an increase in price lowers total revenue. Inelastic demand—an increase in price raises total revenue. Ask the students to think of products or services to which they are price sensitive and some to which they are not. Pricing and a firm’s competitive advantage A product/service that will address unmet needs yields demand. Most products/services are different, but similar products/services can be marketed differently. Product price—using prestige pricing to signal quality, uniqueness. 2 Apply break-even analysis and markup pricing. PPT 15-11/TM 15-11Applying a Pricing System PPT 15-12 Break-Even Graphs for Pricing [Acetate 5-12] PPT 15-13/TM 1