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Module 7 Notes

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MKT 100
Paul Finlayson

Module 7: Pricing Section 1: Understanding Price Prices determine how we allocate and use resource on the earth Efficient, healthy markets, price goes up when demand increases more than supply increases, or when supply decreases more than demand decreases Price goes down when demand decreases more than supply decreases, or when supply increases more than supply increases As prosperity around the world increases, the demand for all service and products increases Prices usually rise more than they drop Section 2: Price Sensitivity For established products, decision to raise or lower prices is based on the effect of a price change on gross contribution Gross contribution: quantity sold times contribution and contribution is price minus variable cost per unit Demand curve: specifies the quantity of goods sold at various price levels and the sensitivity of demand to fluctuations of price Elasticity: Market or market segments sensitivity to price High negative price elasticity price increases , demand decreases a lot Consumers are more price sensitive when o Price is a large part of income (major purchase, car) o Targeted buyers have little money to spend on the stuff o Recession o Whole product category becomes much more expensive than it was (ex gas) o Little product differentiation and quality difference between competitive products , thus the product has come a standardized commodity www.notesolution.com
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