MKF1120 Lecture Notes - Lecture 8: Price Floor, Price Fixing, Fixed Cost

• School: Monash University
• Department: Business - Marketing - MKF
• Course: MKF1120
• Professor: Peter Wagstaff

Document Summary

Price primarily refers to the economic costs, but can also refer to the psychological, personal investments and risk (non-financial) because they are the sacrifices that the consumer must give up. 7-eleven vs woolies = convenience vs cheaper pricing. Positioning: the overall marketing mix should reflect the desired positioning. Costs: costs set the price floor: fi(cid:454)ed (cid:272)osts: do(cid:374)"t (cid:448)a(cid:396)(cid:455) (cid:449)ith (cid:395)ua(cid:374)tit(cid:455) p(cid:396)odu(cid:272)ed o(cid:396) sold. La(cid:396)ge(cid:396) quantities will make each unit carry a lower share of the fixed costs: variable costs: they will vary directly with the level of production, total costs = var costs + fixed costs. Cost+ pricing: a standard markup on the cost. Break even volume: fc/(unit sell price = unit vc) Customer perceptions: perceived consistency of positioning, perception of value, elasticity of demand, price sensitivity. Inelastic demand curves (low level of price sensitivity) When price goes up, total revenue also goes up. Elastic demand curve (high level of price sensitivity) When price goes up, total revenue goes down.