Various approaches to pricing are presented below. Determine what the actual price

set by the firm will be in each case and specify what kind of pricing approach that is

used in each case.

a. The variable unit costs associated with producing an item are $15. The company

adds a surcharge equal to 60% of the variable unit costs to determine the price.

b. Three competitors of a company quote the following prices for a widget: A,

$15; B, $20; C, $22. Our price is set such that it is consistently 10% below the

average of these three main competitors.

c. The relationship between the price and the demanded quantity of a widget a

firm produces is illustrated in the figure below. Set the price such that the firm

guarantees a sale of 5,000 units of the product in the next month.

d. The following data relates to a survey measuring the perceived value of a service.
Determine the price charged for the service, given that price is at 5% below the
perceived value.

Transcribed Image Text:

Demanded quantity 14000 12000 10000 8000 6000 4000 2000 Price and demanded quantity for a widget 0 0 10 20 30 Price ($) 40 40 50 60 60