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Pricing Decisions Assignment

   

Added on  2020-04-29

5 Pages927 Words31 Views
Running Head: Pricing DecisionsFactors to Consider when Choosing the Best Pricing Strategy for Schmeckt Besser Energy BarStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Pricing Decisions Assignment_1
Pricing Decisions2Factors to Consider when Choosing the Best Pricing Strategy for Schmeckt Besser Energy BarProblem APart 1Price elasticity of demand gives information to the seller about the possible reaction that the buyers will have upon a price change (Moffatt, 2017). This is very important therefore in deciding the price to charge for the goods produced. The topic of elasticity helps in understanding the nature of the good depending on the magnitude of demand. A good with a high demand even when the prices are high is considered price inelastic (Pettinger, 2017). Similarly, a good that demand is low when prices are high is considered price elastic. Elasticity helps the investor therefore in determining the changes that will occur to the revenues when they vary their prices. It is crucial for the Board of Schmeckt Gut to understand that raising the price does not always result in an increased revenue; it only happens when demand is inelastic to price. If the demand is elastic to price, even a price rise could result in a reduced revenue. The board should also understand that lowering prices may at sometimes increase the producer’s revenue; this is the case where demand is price elastic; this is because more consumers will demand the good.Part 2In order to ensure that the introduction of Schmeckt Besser energy bar is smooth, the instructions the board should give the Schmeckt Gut Research Department are as follows. One is to determine the nature of the good which will determine the magnitude of need for this product. If the energy bar attests to be a necessity good, then the board should introduce the product at a higher price since demand will still be significant; otherwise it should be introduced at a lower price. The researchers should also identify the availability of close substitutes; if there are close substitutes, the energy bar will be price elastic and thus should be introduced at a lower price; otherwise it should be introduced at a higher price. The price should be equal or lower than for the close substitutes if available to make it more attractive in the market.
Pricing Decisions Assignment_2

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