Chapter 19 – Pricing

1. State three factors that influence the price of fish and chips (3 marks)

1. Target market 2. Location 3. Community

2. Calculate the price charged to the customer if a firm adds a 300% mark up to a product costing £12 (4 marks) If the firm adds 300% it would be 3 lots of 12 because it is the whole of the price. Therefore 12 x 3 is 36. = £36.00

3. Explain why a product retailing at £99.99 is likely to be more appealing than one selling at a price of £100 (4 marks) This is promotional pricing, it is used when a business is trying to gain additional sales or sell old unused stock or services. On an aeroplane they discount the price just to get rid of the last seat, as the plane is going to fly anyway so they might as well get some money from it. It is a very common method of pricing. People perceive the item to be worth much less.

4. Analyse which method of pricing is most likely to be successful to a firm selling a. A plasma television set (4 marks) b. Remaining seats on an aircraft (4 marks)
Remaining seats on an aeroplane would fit the method of discounting the price. This is because they want to make as much profit from that flight as possible, if the cost is lower there is more chance it will be sold.

If a plasma TV is priced as £90.99, it means its promotional pricing. This is where customers perceive the price to be lower than it actually is and because TV’s are expensive this will help it sell.

5. Evaluate the most appropriate method of pricing for a self–employed builder (8 marks)
A self-employed builder should use differential pricing, where he charges for the products used like cement and bricks and tiles as well as the service/labour. This is so he makes the most out of the job and insures he makes a profit because he is having to buy the products to make the house.