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Quantity Demanded

Example of a Linear Price-Quantity Demand Function. MWB(uy). Two observations on the price-quantity demand schedule. Quantity Demanded. *. *. MWP(ay). 0. 0. Price Charged. Variable Cost (VC).

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Quantity Demanded

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  1. Example of a Linear Price-Quantity Demand Function MWB(uy) Two observations on the price-quantity demand schedule Quantity Demanded * * MWP(ay) 0 0 Price Charged Variable Cost (VC) The Optimal price is the mid point between the Maximum Willingness to pay and Variable Cost of the Product GM* = -1/e Where, GM*, (gross margin*) indicates the gross margin at the optimal price and e = the elasticity of demand. Since GM*= (P*-VC)/P* =-1/e, Paul Farris

  2. Pricing Principles • Cost • Value • Competition Paul Farris

  3. Product Life Cycle Clay Christensen • Features, technologies • Quality, reliability • Ease of use, convenience • Price Paul Farris

  4. Summary • Cost, value, competition and sense of strategy over the product life cycle • One price will rarely do the job • Segmentation • Bundling • Selling through distributors • Pricing is a process that can be improved and innovated Paul Farris

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