1

T13-A The many names for price

Tuition The price paid for…EducationRent The price paid for…An apartmentPremium The price paid for...Car insuranceFee The price paid for...Dental and medical workDues The price paid for…Membership in an organizationFare The price paid for…TransportationWage The price paid for…Hourly workersInterest The price paid for…Money

2

T13-B Price, benefits, and value

Perceived product orService attributes

Perceived substituteProduct or service

attributes

Perceived product orService price

Perceived substitute Product or service

price

3

T13-C Consumer perceptions of value for money spent on products and services

High value Medium value Low value

•Poultry •Fruits vegetables•Meat •Fish •Appliances

•Men’s apparel

•Prescription drug

•Restaurant meals •Shoes •Carpets

•Air fares •Telephone

service •Fast foods •Life insurance •Home repairs

•College tuition

•Auto repairs•U.S.

postage •Auto

insurance

•Medical services

•Lawyer’s fees

•Movies and theaters

•Financial services

•Cable TV

4

T13-D The profit equation

Profit = Total revenue – Total cost

Total revenue = Unit price X Quantity sold

Total cost = Fixed cost + Variable cost

5

T13-E Price elasticity of demand

Price (P)

Quantity(Q)

Elastic demand (E>1)Percentage change in quantity demandedIs greater than percentage change in price

Unitary demand (E=1)Percentage change in quantity demanded is equal to percentagechange in price

Inelastic demand (E<1)Percentage change in quantity demanded is less than percentage change in price

6

T13-F Price elasticity for Starkist Chunk Light Tuna varies by region

Seattle(-2.52)

Los Angeles(-3.19)

Chicago(-3.30)

JacksonvilleOrlando(-1.30)

Boston(-2.50)

Kansas City(-1.93)

7

T13-G Break-even analysis chart

Total Revenue and total costTotal Revenue

Profit Total cost(Fixed andVariable cost)

Variable cost

Fixed cost

Quantity

Loss