Exam (elaborations)
MODULE 2 - PROFITS SENSITIVITY TO PRICE 2024 FINANCIAL MARKETS
- Course
- FINA 212.
- Institution
- La Salle University
MODULE 2 - PROFITS SENSITIVITY TO PRICE 2024 FINANCIAL MARKETS
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lOMoAR cPSD| 37668344lOMoAR cPSD| 37668344
MODULE 2 - PROFITS SENSITIVITY TO PRICE
2024
FINANCIAL MARKETS
Scan to open on Studocu
MODULE
Flexible Learning A.Y. 2020-2021
2 DISTANCE EDUCATION COURSE STUDY GUIDE v.3
6 hours
Course instructor: Liza Mae P. Nismal
Contact details: FB messenger: Liza Mae Nismal | Email: l.nismal@usls.edu.ph | Phone: +63 9231133807, 446-1281
Consultation schedule: Class hour (Asynchronous)
Profits Sensitivity to Price
In this module, we explore the rational approaches to setting prices and managing price decisions.
Economic price optimization is useful in some markets. Unlike the broad range of prices developed from
exchange value models, economic price optimization can provide price guidance down to a fraction of a cent. In
markets for mature, commonly purchase products customers will switch suppliers to capture even the slightest
price break. To capture and retain customers, executives need the higher level of accuracy provided through
economic price optimization than that provided through exchange value models. Economic price optimization
requires a highly accurate understanding of the relationship between prices and demand.
Despite the apparent ability of economic price optimization to pinpoint a price, it is not appropriate for
pricing decisions. One of the key differences between revolutionary products and more mature products is the
availability of relevant information regarding the customer’s response to price changes. In revolutionary markets,
the product will have very little track record from which to quantify the customer response to price changes. In
more mature markets, research and statistical approaches may reveal an accurate relationship between prices and
demand.
Learning Outcomes
At the end of the lesson, you must have:
1. Recognized the influence of price changes to capture customers
2. Differentiated the relationship between the price cuts, to sales volume and the firm’s profit
3. Computed the elasticity of demand to optimize profit.
Match the different levels of price sensitivity in Column A to the products found in Column B.
1. Price sensitivity is
high
, lOMoAR cPSD| 37668344
2. Price sensitivity is
almost null
B.
MRKT102: Pricing Strategies Module 2 | Page 1
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