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Chapter: Engineering Economics and Financial Accounting : Pricing

Important Questions and Answers: Pricing

Engineering Economics and Financial Accounting - Pricing - Important Questions and Answers: Pricing


1)     what are the two factors in pricing strategies?

1) external factors


2) internal  factors


2)what are the external factors in pricing strategies?


i.  The competition in the market


ii. The elasticity of supply and demand


iii. Trends of the market


iv. purchasing power of buyers.


v. government policies towards prices.


3)what are the two factors in pricing strategies?


1) The costs


2) Management policy towards the gross margin and the sales turnover


4)what are the determinants?


1)objectives of business





3)product and promotional strategies 4)Nature of price sensitivity 5)influrnce of middle men 6)Routinisation of pricing 7)Government regulation


5)What is objectives of business?


The fundamental objective of a firm is to survive in the business and then thrive.The pricing strategy adopted by a firm is very much by these factors.


6)what is competition in pricing strategy?


To come out with a pricing policy that will be advantages to the firm,managers require a perfect understanding of the competitive environment in which the firm is placed.


7)what are product and promotional strategies?


i.  product itself


ii. pricing


iii. promotion activities


iv. distribution of products through the channel to the consumer.


8)what is nature of price sensitivity?


We know that many factors contribute to the increase of price sensitivity,but managers should not ignore the factors that minimize price sensitivity .when designing pricing strategies.


9)what is influence of middlemen?


Middlemen are the ones who stock the finished product of the manufacturer to sell it to the customers.these are also called the channel for distribution.


10) What is routinization of price?


This strategy of pricing relies on the tried and trusted pricing strategies which the organization has followed all along. This pricing practice is often routinized but the extend varies from company to company and from product to product.


11) What is the government regulation in pricing?


Inorder to safeguard the interests of the public the government acts on their behalf to prevent the abuse of the monopolistic power and collusion among business.



12)  Say some of the objectives of the pricing policy?


i. profit maximization.


ii. long term welfare of the firm.


iii. facing competition.


iv.flexibility to economic changes.


v. satisfying rate of returns.


13)  What are the cost oriented pricing method?


i. cost plus pricing or full cost pricing.


ii.marginal cost pricing or incremental or direct cost pricing. iii.target pricing or rate pricing.


iv.programme pricing.


14)What are the competition oriented pricing method? i.going rate pricing.


ii.loss reader pricing. iii.customery pricing. iv.price leadership pricing. v.trade association pricing. vi.cyclical pricing. vii.imitative pricing. viii.turnover pricing.


15)  What are the praising based methods? i.administered pricing.


ii.dual pricing.


iii.price discrimination or differential pricing.


16) What are cost oriented pricing methods?


i) cost plus.



ii)  marginal cost pricing.


iii) target pricing.


17) What is going rate pricing method?


In going rate pricing the emphasis is on the market situation unlike the full cost pricing where the emphasis was on costs.


18) What is leadership pricing method?


The pricing strategy is widely used in retailing buiness. Because the names has the word loss in it this policy may be confused with the pricing which results in losses.


19) What is customary pricing method?


In case of some products their prices get more or less. This does not happen due to deliberate action on the seller’s part but it happens as the results of the product prevailing in the market for a long period of time.


20) What is price leadership method?


In any industry, out of all the firms operating industry, atleast one firm will have its cost of production lower than all other firms.


21) What is trade association pricing method?

The kind of pricing arises out of an unsaid understanding agreement between the firms operating in the market.


22) What is the cycling pricing method?


The pricing method which is done to capitalize on the cycles of the season in nature and the cycle in the economy are known as cyclical pricing.


23) What is imitative pricing method?


It is very similar to the loss leader pricing method. This pricing policy is often used in retail business.


24) What is turnover pricing method?


Turnover is the word which denotes the sales of the product. The higher the turnover means higher the sales.


25) What is dual pricing method?


Usually the firms which produce essential commodities have part of their product under administrating pricing and part of the product is solid in the free market.


26) What is price?



Price is the source of revenue for the firm and it decides the health of the firm.the customer acceptance or rejection of a product is most of the time predominantly influenced by price.


27) What are the external factors influencing the précising decision?


i.the ccompetition in the market.

ii.the elasticity of supply and demand.

iii.trends of the market. 

iv.purchasing power of buyers.

v.government policies towards prices.


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