Business plan pricing policy in economics

Using examples, explain how scarcity, choice, opportunity costs affect decisions that households, businesses, and governments make in the market place and explain how comparative advantage creates gains from trade. Circular Flow and the National Economy. Using the concept of circular flow, analyze the roles and the relationships between households, business firms, financial institutions, and government and non-government agencies in the economy of the United States.

Business plan pricing policy in economics

A look at different pricing strategies a firm may use to try and increase profitability, market share and gain greater brand loyalty. Types of pricing strategies General strategies Profit maximisation. One strategy is to ignore market share and try to work out the price for profit maximisation.

In practice, it can be difficult to work this out precisely. Aiming to maximise sales whilst making normal profit.

Microeconomics: Making Economic Decisions - Starting A Business

This involves selling at a price equal to average cost. Some firms may have a target to increase market share, this could involve setting prices as low as they can afford, leading to a price war. A similar concept to sales maximisation. This occurs when a firm makes a good more expensive to try and give the impression that it is better quality, e.

business plan pricing policy in economics

Loss Leaders This involves setting a low price on some products to entice customers into the shop where hopefully they will also buy other goods as well.

However, it is illegal to sell goods below cost, so firms could be investigated by OFT. This involves charging a different price to different groups of consumers to take advantage of different elasticities of demand. There are different types of price discrimination from first degree to third degree.

This involves setting an artificially high price to be able to later offer discounts on previously advertised price. The purpose behind price matching is making a promise to match any price cuts by your competitors.

The argument is that this discourages your competitors from cutting price. This is because they know there is little point in cutting prices because you will respond straight away.

Very clear price matching stances can thus avoid price wars and give the impression of being very competitive. Retail price mechanism RPM — when manufacturers set minimum prices for retailers, e. Setting price at important psychological levels to trigger purchase, e.

Some firms use reverse psychology and charge exact prices, e.

Planning, Strategy and Supply and Demand

Where a firm sets the price of one good deliberately high to encourage demand for a lower price. Pay what you want. A situation where consumers are left free to decide how much to pay, e.

When music companies release a new recording and ask for donations. When a firm gives special offers, e. When a firm releases a new product, it initially sets a high price to take advantage of those consumers with inelastic demand. Over time, the price is reduced to attract those customers with more price elastic demand.

When a firm sets a low price to help establish market share and get established.Business Plan for Platte County Assisted Living Facility Page 3 provide exceptional care at an affordable price, implementing industry “best practices” to enhance the quality of life for residents.

Sep 28,  · The right pricing strategy will maximize your profits, and the wrong one can really hurt your business. 6 Different Pricing Strategies: Which Is Right for Your Business?

Pricing strategies | Economics Help

By April Maguire. Because customers need to perceive products as being worth the higher price tag, a business must work hard to create a value perception. /5(). Meaning of Pricing Policy 2.

Considerations Involved in Formulating the Pricing Policy 3. Objectives 4. Factors Involved. Meaning of Pricing Policy: A pricing policy is a standing answer to recurring question.

Keys to Success

The strategic decision in pricing a new product is the choice between (1) a policy of high initial prices that skim the cream of demand and (2) a policy of low prices from the outset serving as an active agent for market penetration.

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By continuing to use this site you consent to the use of cookies on your device as described in our Cookie Policy unless you have disabled them. The pricing strategy you choose dramatically impacts the profit margins of your business.

Several pricing strategies exist for products and services, and choosing the best for your business.

Pricing - Wikipedia