Question 1

Price elasticity of demand measures how sensitive consumer demand and the firm's revenues are to changes in the product's price. Explain the difference between a product with elastic demand and a product with inelastic demand.

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Question 2

What is the difference between a movement along a demand curve and a shift of a demand curve?

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Question 3

To reduce the price sensitivity for some of its products, Washburn Guitars
A)uses multiple suppliers for its raw materials.
B)offers three months of free music lessons with the purchase of each guitar.
C)uses endorsements by internationally known musicians who play Washburn signature guitars.
D)offers a lifetime, unconditional warranty on all its instruments regardless of the price of its guitars.
E)sponsors free music programs and special Washburn guitar camps for children.

Accepted Answer

Using endorsements by famous musicians who play Washburn guitars can create brand loyalty and appeal to customers who are more interested in the quality and reputation of the product rather than just the price. It can also make the product more desirable and elevate the perceived value, which can reduce price sensitivity.

Question 4

Describe a profit objective used by many Japanese manufacturing firms.

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Question 5

Distinguish between elastic demand and inelastic demand.

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Question 6

Factors other than price affect demand. What are they and how do they work?

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Question 7

Washburn Guitars markets its guitars to four distinct market segments. The firm's batch-custom instruments are targeted at
A)first-time buyers.
B)professional musicians.
C)celebrities.
D)large institutional buyers such as band programs.
E)intermediate-skill players who may become professional musicians.

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Question 8

In the process of setting price, a marketer must first identify pricing objectives and constraints. Next, in Step 2, three specific estimates are necessary. What are they?

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Question 9

Step 1 of the price-setting process identifies pricing objectives and constraints. Describe the reasons these objectives may change and give examples of objectives a firm may set.

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Question 10

Describe the pricing constraints a firm is likely to face.

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Question 11

What are the six broad objectives that an organization may pursue that tie in directly to its pricing policies?

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Question 12

How do consumers use price in their assessments of value?

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Question 13

Washburn Guitars markets its guitars to four distinct market segments. The firm's mass-produced instruments are targeted at
A)first-time buyers.
B)professional musicians.
C)stars and famous musicians.
D)guitar collectors and music aficionados.
E)intermediate-skill players who may become professional musicians.

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Question 14

What are the six major steps involved in setting prices?

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Question 15

Washburn Guitars recently purchased Parker Guitar, another guitar manufacturer that designs products for professionals and collectors, and will combine the two production facilities into a new location. Washburn expects the acquisition to reduce its rent and tax expenses by 40 percent, and the new skilled employees will reduce the hours of work needed for each unit by 15 percent. This would cause the slope of the total cost curve to __________ and the break-even quantity to __________.
A)decrease; stay the same
B)decrease; increase
C)increase; increase
D)stay the same; increase
E)decrease; decrease

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Question 16

List four key factors used to estimate demand.

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Question 17

Washburn Guitars markets its guitars to four distinct market segments. The firm's mass customization instruments are targeted at
A)first-time buyers.
B)professional musicians.
C)stars and famous musicians.
D)large institutional buyers such as band programs.
E)intermediate-skill players who may become professional musicians.

Accepted Answer

The question asks for the target market of Washburn Guitars' mass customization instruments. Option E is the most appropriate as it targets intermediate-skill players who may become professional musicians.

Question 18

Describe the types of competitive markets and give an example of each one.

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Question 19

Explain the price equation in the context of a new car purchase.

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Question 20

The executive vice president of Washburn Guitars has set a sales target of 2,000 units for a new line of guitars. This type of objective is a __________ pricing objective.
A)profit
B)target return
C)unit volume
D)market share
E)survival

Accepted Answer

A unit volume pricing objective is focused on a specific level of sales or units sold. In this case, the target set by the executive vice president of Washburn Guitars is a specific unit volume target of 2,000 units.

Quiz 13: Building the Price Foundation