Question

The topic is about marketing pricing objectives, please kindly:

1. Describe the typical demand curve, including the relationship between price and sales

2. Explain break-even analysis, with example

3. Clarify the difference between price skimming and penetration pricing, using an example to illustrate when each pricing strategy would be appropriate

Answer 1

1. Demand curve is representation of the relationship between the price of the goods and service and the quantity which has been demanded for that goods and services so the prices will be appearing on the left vertical axis and the quantity demanded will be existing on the horizontal axis.

The quantity demanded will be having an inverse relationship between the sales price because when the sales price will be going up the quantity demanded will be going down, and hence there will be lower sales at Higher price hence sales will also have an inverse relationship.

2. Break even analysis is an analysis which will be looking at the level of cost in relation to the profit earned by company and it is useful in studying the relationship between the variable cost along with fixed cost and revenue ,so it will help in determination of point at which there will be no net loss or no net gain so so it will be a point after which the company will be making the profits.

if the total cost of a product is $10 and the company has been making a sale of those products at $10, then the company will be breaking even and it will not making any profit

3. price skimming is a policy in which prices are kept very high for a particular product where as price penetration is a policy under which prices are kept lower and competitive in relation to its competitors

Price skimming is generally adopted for a product which is unique in nature whereas price penetration will be adopted for a product which will be having high number of substitute.

For example, iPhone is having a price skimming policy as it does not have a substitute whereas Chinese phones are keeping their rate lower because of price penetration and it will help them in increasing sales by cutting prices.