MKTG 350 Lecture Notes - Lecture 10: Demand Curve, Profit Margin, Price Fixing
28 Oct 2016
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Profit oriented: all products need to generate certain profit margin. Sales oriented: set prices low to make sales and take sales at expense of profit. Competitor oriented: set prices very low to discourage competitors. Customer oriented: target a market segment of consumers who highly value product benefit and set prices relatively high (premium pricing) Consumers are less sensitive to price when product is a necessity. Slope of demand curve is a measure of elasticity. The more elastic, the less steep the line, the more sensitive the consumer is to change the price. Price elasticity of demand: %change in quantity demanded/ %change in price. If absolute value of the slope is greater than 1, it is elastic. If absolute value of the slope is less than 1, it is inelastic. Effect of income on demand for a good. Edlp saves search cost of finding lowest prices. Willing to spend more initially if product will cost less to own.
