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**Psychological**Pricing Pricing Strategies Loss Leaders Competitive Pricing Full-cost (absorption-cost) pricing Marginal-cost Pricing Predatory Pricing Creaming / skimming Cost-plus pricing Discrimination Pricing Premium Pricing Penetration Pricing Going-rate Pricing**What is meant by price elasticity of demand? [2]**Exam questions The responsiveness for demand for a product when there is a change in price.**Price elasticity**The percentage change in quantity demanded is greater than the percentage change in price Price P2 P1 D Q2 Q1 Quantity**Price inelasticity**P1 P2 The percentage change in quantity demanded is less than the percentage change in price Price D Q1 Q2 Quantity**Price elasticity of demand**PED is usually negative because a fall in price (-ve) usually results in a rise in demand (+ve) % ∆ QD % ∆ P • Calculate the % ∆ P • Calculate the % ∆ QD • Example: PED=10/25 = 0.4 If it is <1 is it negative**June 2005 paper 1**Jomo manages a small printing business. One of his customers asked Jomo to quote a price for a sales leaflet that they needed. Jomo investigated the costs of the order and his results are shown in Figure 1. Jomo add a 50% mark-up to the average cost per unit to calculate the selling price. $ Total cost 64,000 1. Do you think that the pricing method Jomo uses is the best one for his business? Explain your answer. [6] 2. Suggest an alternative pricing method for Jomo to use. Justify your answer. [6] No of copies 10,000**Activity 27.7 Levis & Tesco**Mark scheme – Attempt at evaluative comment in context, eg. Likely outcome if Tesco are allowed to sell Levi jeans. [11-12marks] Analysis of how Tesco’s pricing strategies could harm Levi’s reputation [8-10]marks] Shows a good understanding of the effects of different pricing strategies [3-7 marks] Show some understanding of the effects of different pricing strategies [1-2marks]**Homework –**• Explain: • Income elasticity • Cross elasticity • Advertising elasticity • Use graphs to help you explain your answers. • [12]