Question 1

Identify the correct formula for the calculation of price elasticity of demand.

Accepted Answer

Price elasticity of demand is calculated by finding the percentage change in quantity (demand) demanded in response to a percentage change in price. Therefore, the correct formula is E = percent change in demand/percent change in price.

Question 2

Which of the following statements is true regarding the first-degree of price discrimination?

Accepted Answer

First-degree price discrimination involves charging different prices to segments of the market according to their price elasticity or sensitivity.

Question 3

Because more competition implies greater convergence on a standard price,a large number of suppliers in a product category most likely results in:

Accepted Answer

A large number of suppliers typically leads to narrower price bands due to increased competition, which drives prices towards a standard level.

Question 4

The concept of "value-in-use" is a useful method of estimating customer value for:

Accepted Answer

The concept of "value-in-use" is particularly useful for industrial products as they are typically purchased for their ability to perform a particular function or provide a specific benefit to the business. Therefore, understanding the customer's perceived value in using the product is important in determining the price and marketing strategy.

Question 5

Charging different prices to different segments according to their price elasticity or sensitivity is commonly known as:

Accepted Answer

Charging different prices to different segments according to their price elasticity or sensitivity is commonly known as price discrimination. Price differentiation refers to offering different products/services at different prices. Price segmentation refers to dividing the market into different segments based on common needs and characteristics, and then offering different products/services to each segment. Price preference does not refer to any pricing strategy.

Question 6

Identify the approach where the benefits of the product are put in monetary terms such as time savings,less use of materials,or less downtime.

Accepted Answer

The approach where the benefits of the product are put in monetary terms such as time savings, less use of materials, or less downtime is known as value-in-use. This approach can help in determining the actual value of a product for customers and can also justify a premium price for the product based on the benefits it provides. Value-in-use is different from value pricing, which is a pricing strategy where the price of a product is based on the perceived value of the product to different customer segments. Pricing to value is also a pricing strategy where the price of a product is based on the value it provides to customers, but it does not necessarily involve putting the benefits of the product in monetary terms. Price discrimination is a pricing strategy where different prices are charged for the same product to different customer segments based on their willingness to pay.

Question 7

Which of the following is the the maximum price someone is willing to pay for a product?

Accepted Answer

The maximum price someone is willing to pay for a product is referred to as the reservation price. The external price refers to the actual price of the product in the market, the internal price refers to the perceived value of the product by the consumer, and the reference price is the price with which consumers compare the actual price of the product. Therefore, B is the correct choice.

Question 8

As the price of a product gets closer to customer value,

Accepted Answer

As the price of a product gets closer to customer value, the price elasticity will increase. This is because when the product comes closer to the customer's perceived value, the customer becomes more sensitive to price changes and tends to switch to other products if they are available at a lower price or if they perceive them to be of better value. Therefore, the demand becomes more elastic, leading to a higher price elasticity of demand.

Question 9

Which of the following best describes a trend in business to purchase a service from an outside vendor to replace the company's operation?

Accepted Answer

Outsourcing refers to the practice of contracting out a business operation to an outside vendor rather than handling it internally. This trend has become increasingly common in recent years as companies seek to reduce costs and focus on their core competencies.

Question 10

When the absolute value of price elasticity of demand is ________,the category is price elastic.

Accepted Answer

When the absolute value of price elasticity of demand is greater than 1, it indicates that a relatively small change in price results in a large change in quantity demanded. This means that consumers are highly responsive to changes in price and the category is considered to be price elastic.

Question 11

Which of the following is most likely a reason of why some categories have large numbers of product variants?

Accepted Answer

Having a large number of product variants can help a company occupy more shelf space, making it harder for competitors to gain visibility and shelf space in retail environments.

Question 12

Price variations within a product category are called:

Accepted Answer

Price variations within a product category are commonly referred to as "price bands." This term is often used to describe a range of prices for products within a particular category, which may vary depending on factors like quality, features, or brand name. Price bands can be useful for consumers who are trying to compare different options within a category, as well as for retailers who want to offer a range of prices to appeal to different types of customers.

Question 13

Which of the following approaches to calculating customer value creates a scale that puts survey responses in monetary terms?

Accepted Answer

The dollarmetric method is used to assign a monetary value to different responses on a survey. This allows for easy comparison and understanding of customer value in financial terms. The other options do not involve assigning numerical values to survey responses in terms of money.

Question 14

In this situation,the manager has set a price that is higher than the target market is willing to pay.The customer looks at this situation as a bad deal and,unless the company has a monopoly or some other kind of market power,does not buy.Identify the situation.

Accepted Answer

This situation represents when the price is higher than the perceived value in comparison to the cost. Customers perceive that they are not getting their money's worth and therefore will not buy unless the company has a monopoly or some other kind of market power.

Question 15

With regard to price elasticity,if a product's price is low to the point where there is considerable value left for the customer (a good deal),an increase in price will:

Accepted Answer

If a product's price is already considered a good deal, a small increase in price will not significantly impact customer demand. This means that the product has a low price elasticity, and demand will remain relatively stable even with a price increase. Thus, option B is the best choice as it states that the price increase will not have much impact.

Question 16

Which of the following best describes setting a price at the level determined to represent the customer's perceived value for your product?

Accepted Answer

The answer of Which of the following best describes setting...

Question 17

What a product or service is worth to a customer is the:

Accepted Answer

Customer value refers to the perceived worth of a product or service to a customer. It takes into account factors such as quality, benefits, and price. The customer value is important for determining the success of a business because customers are willing to pay for products or services that provide value to them. Therefore, understanding customer value helps businesses create products and services that meet customer needs and expectations, and thus increase customer loyalty and profitability.

Question 18

This scenario clearly represents a failure.Usually,such products are weeded out in the new-product development process.If not,they are ultimately withdrawn from the market.Identify this scenario.

Accepted Answer

In this scenario, the price is higher than the perceived value, meaning consumers do not see the product as worth the cost, leading to failure in the market.

Question 19

Strategically pricing below customer value is called:

Accepted Answer

Value pricing involves strategically setting a price that is below the customer's perceived value of the product or service, to create a strong incentive for them to purchase. Price skimming involves setting a high initial price for a new product, while pricing to value involves setting a price that aligns with the customer's perceived value of the product or service. Price discrimination involves charging different prices to different customers based on their willingness to pay. However, none of the other options involve pricing below customer value as a deliberate strategy.

Question 20

Which of the following statements is true about perceived value?

Accepted Answer

Perceived value is always relative and subjective as it depends on individual customer preferences and past experiences. It can differ based on factors like brand name, product features, quality, and customer service. Therefore, there is no single perceived value in the marketplace, and it can vary among customers. Value pricing, on the other hand, involves setting a price that is lower than the perceived value to increase sales and market share. Similarly, perceived value is not standard across customers with similar purchasing power as they may have different expectations from a product based on their needs and preferences.

Quiz 9: Pricing