CH 11

internal reference price

A consumer's mental image of what a product's price should be based on experience and the consumer's estimate of what the comparative value might be.

there are four key factors for pricing

1)demand for the product or service 2) value delivered to the customer 3)prices set by competing firms 4)your business strategy and product placement

external reference price

An estimation of what a price should be based on information external to a consumer, such as advice, advertisements, or comparison shopping.

price gouging

Charging an outrageously high price for something.

elastic product

Product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased.

inelastic product

Product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased.

law of supply and demand

The economic theory that describes how the demand for products (or services) and the supply of them affect each other.

optimum price

the highest price that will produce your desired level of sales in your intended market