Determining price levels and pricing policy

Abstract Determining charge levels and pricing policy affects revenues and consumer prerequisite and thus remains one of the most important elements in determining lucrativeness and market share. Part of the pricing process involves the forecast of agonistical reactions to outlay changes and its economic effects on put up and necessary. This paper examines the effect of a hurt drop-off outline on harvest-time X given a hypothetical subject situation. The paper discusses the business situation and provides an estimated change in profits with and without a competitive response given entropy legitimate from marketing, general management and accounting. The final section concludes the paper. Business attitude In an earlier memorandum, product management requested entropy from marketing, general management, and accounting to helper evaluate the effect of a proposed 10% price reduction on product X (see appendix A). Key data extracted for the evaluation is as follow s: exchange *Price Elasticity Calculation PriceQuantity DemandedPrice Elasticity $5.007 $4.5092.5 (absolute value) %?Q = (7-9) / ((7+9) /2)) = -2/8 = -.25 %?P = ($5.00-$4.50) / (($5.00+$4.50) /2)) = .50/$4.75 = .10 Elasticity = %?Q/%?P = -.25 / .10 = - 2.5 fictile *Therefore, if price decreases by 1%, quantity demanded increases by 2.5%. Given a price pushover coefficient of 2.5 and a 10% price decrease, expect a 25% increase in quantity demanded (%?Q/%?P=E; E (%?P)=%?Q; 2.

5%(10%)=25%). *Marketing expects competitors will lower prices in response to a price reduction. General Management * token(prenominal) prof it margin of 30% annually Accounting * to a ! lower place elastic demand, given a 10% decrease in price and a 25% increase in quantity, essence gross sales revenue (TSR) will increase by 35% (%?TSR = %?P + %?Q = 25% + 10% = 35%). Note, where demand is elastic, total consumer expense moves in the opposite direction to price (Lieberman, 2000). The total nab of consumer spending is also the... If you want to get a spacious essay, order it on our website: OrderCustomPaper.com

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