Pricing Strategy & Market Analysis Flashcards
7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Pricing Strategy & Market Analysis flashcards as text
A company notices that lowering its price by 10% increases unit sales by 25%. What does this indicate about demand elasticity?
Answer: Elastic demand
When a 10% price decrease leads to a 25% quantity increase, the price elasticity of demand exceeds 1 in absolute value, indicating elastic demand.
Which pricing strategy sets a high initial price to 'skim' early adopters before lowering the price over time?
Answer: Price skimming
Price skimming targets early adopters willing to pay a premium, then sequentially captures more price-sensitive segments as the price declines.
In competitive pricing analysis, what is a 'price band'?
Answer: The range between the lowest and highest competitor prices in a market
A price band represents the competitive price range from the lowest to highest competitor prices, helping firms position their own price within the market.
A firm uses value-based pricing. Which input is MOST critical to setting the price?
Answer: Customer's willingness to pay based on perceived benefits
Value-based pricing anchors the price to the economic value customers receive, specifically their willingness to pay driven by perceived benefits.
What does a 'competitive parity' pricing strategy mean?
Answer: Setting prices equal to or in line with the primary competitor
Competitive parity means aligning your price with leading competitors to avoid price-based competitive disadvantage while competing on other dimensions.
Which market structure typically grants the most pricing power to a single firm?
Answer: Monopoly
In a monopoly, a single firm faces the entire market demand curve and has the greatest ability to set prices above marginal cost.
When analyzing a market using the 'five forces' framework, which force most directly affects a firm's ability to raise prices without losing customers?
Answer: Bargaining power of buyers
High buyer bargaining power constrains a firm's ability to raise prices because buyers can negotiate lower prices or switch to alternatives.