MKT 305 Chapter Notes - Chapter 18.2: Switching Barriers, Marginalism, Variable Cost

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10 Dec 2018
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Rationale of the formula: to break even, we must cover total fixed costs. So we must figure the contribution each unit will make to covering the total fixed costs (after paying for the variable costs to produce the item) Assumed selling price per unit minus the variable cost per unit. Focuses on the changes in total revenue and total cost from selling one more unit to find the most profitable price and quantity. Shows how costs, revenue, and profit change at different prices. Costs that a customer faces when buying a product that is different from what has been purchased or used in the past. Setting prices that will capture some of what customers will save by substituting the firm"s product for the one currently being used. The price customers expect to pay for many of the products they purchase. Different customers have different reference prices for similar items. Setting some very low prices to get customers into retail stores.

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