COMMERCE 2MA3 Lecture Notes - Lecture 24: Price Skimming, Premium Pricing, Monopolistic Competition
7 Nov 2016
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Document Summary
Break-even is where production costs equal sales revenue. Below this point, the company is making losses and above this point, the company makes profits. Break-even point is the total fixed costs divided by the contribution per unit, which is the selling price minus the variable cost per unit. Monopoly: one firm has dominant control; less price competition; example: hydro-electric companies. Oligopoly: very few firms but competition is high due to the sale of similar products. Examples included cable tv carriers and cell phone carriers. Monopolistic competition is categorized by large number of firms with less competition. Examples include branded clothing, which have their own niches. They do not need to compete on price. Pure competition: products are very similar and become commodities; examples include gas and water. They have different priorities as opposed to manufacturers. Sales promotions is the fastest way to increase sales. As economy is doing well, demand higher prices.
