Business Economics

  Pricing strategies or methods will depend on the pricing objectives of the company. The strategy must be suitable for achieving the desired objectives. Some categories of pricing methods are given below : Cost based pricing / cost plus pricing Demand based pricing - Skimming & penetration pricing Competition based pricing psychological pricing / odd number pricing Regulated pricing predatory pricing / under cutting 1. Cost based pricing :    The commonly used methods under this category are cost plus pricing /mark-up pricing / full cost pricing. Cost -plus pricing / mark up pricing  is a pricing strategy in which the selling price is determined by adding a specific markup to a products unit cost. The cost plus price will be different for different products. Full cost pricing is based on the estimated unit cost of the product at normal level of production & sales. Variable and fixed costs of production , selling & administration costs are all added to ge...

                      Price is the value that is put to a product / service and is the result of a complex set of calculations , research and undertaking and risk taking ability. A pricing strategy takes in to account segments , market conditions , competitors action , trade margins and input costs , amongst others. It is targeted at the defined customers and against competitors.         There are 4 quality strategies for new produc ts: 1. Premium strategy 2. good value strategy 3. Overcharging strategy 4.  Economy strategy 1. Premium Strategy :   A premium pricing strategy involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to "skim the cream" off the top of the market. (EX: APPLE IPHONE.)  It is used to maximize profit in which there are  no substitutes for the product , where there are barrie...

                     The executives problems of private pricing policy involves many considerations and right advice from the professional business economist. The following are the important factors deserving special attention in determination of a pricing policy of any firm. Costs Demand and consumer psychology Competition Profit Government policy 1. Costs :   It is an important element in price determination. If price is below the cost of production it would means losses. Thus , cost analysis is important. Along the total costs, average cost and marginal costs are to be determined. For business decisions in the short run, direct / variable cost have greater relevance. The firms seek to cover full allocated costs. Economy in cost is also important for setting a lower price for the product. A high cost of production obviously calls for a higher price. 2. Demand and consumer psychology :   In pricing policy , dema...

                                                                        UNIT - 5   Pricing decision is involved in every economic activity. we pay rent for a house, fees to doctor, commission to salesman, premium for insurance , wages to workers. Like wise, business firms also face the problem of deciding the price of the product. The problem is not so easy, particularly when it is to be decided for the first time, that is for a new product and that too for a new market. The reason is that consumer behavior regarding the new product cannot be accurately known. A slight change in price may change the demand pattern, affecting profits of the firm. Entry of the new firms can also influence the situation.       Pricing  is one of the most important function of business firms. As these...