CUET Entrepreneurship-Chapter-Price

(c)

Explanation: In the marketing mix, price mix refers to the important decisions related to fixing of price of a commodity. These decisions may be related to the price of competitors, to the demand, or to fixing cost etc.

(a)

Explanation: Discounts are a part of pricing as they form a part of the cost of selling the product in the market. Discounts are different from sales promotions.

(b)

Explanation: Price mix is central to marketing where it is one of the four variables in the marketing mix that business people use to develop a marketing plan. Price is the only revenue generating element amongst the 4Ps, the remaining three are cost centers.

(c)

Explanation: Services like these offer little scope for differentiation. Also since these are mass products, price becomes an extremely critical and mostly the most important factor for making the purchase decision. That is why one is witnessing a price war in the market right now with every service provider trying to offer cheaper rates than the competitors.

(a)

Explanation: Price is the monetary sacrifice a buyer makes for the product or service.

It must match the utility offered by the product or service. Customers are very sensitive to this element. A mistake in taking these decisions may significantly hamper product sales.

(d)

Explanation: Price is the amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service. It is expressed in monetary terms.

(b)

Explanation: Doctor’s fee is an example of price paid for a product or service. It is the price paid for the consultation. The other options here are penalties paid so that one learns a lesson and doesn’t repeat the mistake.

(d)

Explanation: Price Mix refers to the important decisions related to fixing of price of a commodity. These decisions may be related to the price of competitors, to the demand, or to fixing cost etc.

(d)

Explanation: The price of a product or service must match the utility offered by the product or service. Customers are very sensitive to this element and if they don’t believe they are getting the value for their money they will not buy the product.

(c)

Explanation: Under penetration pricing method a lower initial pricing is used to capture a large market share that helps in keeping the competition out. This helps attract price sensitive customers.

(a)

Explanation: If the objective of the company is profit maximization, the price should be kept high. Higher price would mean higher profit margin.

(b)

Explanation: If the objective of the company is sales maximization, price should be low. Lower price would mean higher sales volume.

(a)

Explanation: If the objective of the company is to create a special image of innovativeness, then too the price should be high. Buyers usually assume that expensive products are better in quality and innovativeness.

(c)

Explanation: The total cost, i.e. both variable and fixed costs along with the discounts are considered while deciding on the price for a product. The product has to cover all these costs in order to be profitable.

(c)

Explanation: In some cases, for capturing market share, the company may wish to consider lower costs (resulting in lower price) and decide to ignore fixed cost for some time.

(a)

Explanation: Total cost is the total economic cost of production and is made up of variable costs, such as labor and raw materials, plus fixed costs, such as buildings and machinery.

(a)

Explanation: In a monopoly, i.e. when there is no competition, one is free to decide the price without any pressure to match the market rate.

(a)

Explanation: In the face of little or no competition in the market place one enjoys greater freedom in fixing the price and can set high price.

(b)

Explanation: An innovative product enjoys the distinction of being new and different. One can therefore charge a premium for such a product. Also such products usually involve high R&D costs that need to be recovered. The price therefore can be kept high.

(a)

Explanation: When one wants to enter a crowded market with a lot of competition, one is restricted by the price of the competitive products. to gain a foothold in such a market, one has to beat the competition and this is usually accomplished by keeping the price lower.

(a)

Explanation: A decision to expand the area of sales will impact all the elements of the marketing mix. All the four elements are interrelated. Change in any one of them affects all the others. To expand the area, one would have to increase distribution. This will affect the price. It may also need more advertising and promotions. The product too may need to be changed to suit a wider market segment.

(a)

Explanation: All the elements of the marketing mix are interrelated. Change in one leads to some amount of change in all the others. If product undergoes a change, i.e., if a feature is added to a product, price too will undergo a change. An additional product feature will result in an increase in the price.

(c)

Explanation: Schools, our institutions that impart us knowledge are also selling a service. Education is a service and we pay a price for it in the form of fees.

(c)

Explanation: Discounts are a part of pricing as they form a part of the cost of selling the product in the market. Discounts are different from sales promotions.

(b)

Explanation: Coupons given for promoting a product are different from a discount. They are a part of sales promotions. Other examples of promotions are sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins and exhibitions.

(b)

Explanation: Each additional feature in a product represents a cost. Therefore when a feature is taken away, the cost will reduce and in turn the price is expected to decrease.

(b)

Explanation: The best solution for keeping the price low is to try and reduce the cost of production. One can’t create a monopoly at will. Also in today’s competitive times, one cannot and should not remove advertising or the incentives for distributors.

(a)

Explanation: Since all the four elements of the marketing mix are interrelated, a decision to expand the distribution network will impact all the elements. To increase distribution, one will need more advertising and promotions. The product too may need to be changed to suit a wider market segment. All this will affect the price directly.

(b)

Explanation: As all the four elements of the marketing mix are interrelated, a decision to increase advertising will increase the cost and as a result it will affect the price directly.

(c)

Explanation: As all the four elements of the marketing mix are interrelated, a decision to reduce promotions will reduce the cost and as a result price can also reduce. The affect will be direct.

(b)

Explanation: Penetration pricing is used to capture large market share at the time of launch. Under this method a lower initial pricing is used at the time of launch that helps in keeping the competition out.

(b)

Explanation: Demand and supply imbalance allows one to charge a higher price. Therefore when the demand is high a high price can be demanded.

(a)

Explanation: Demand is said to be elastic when numerous substitutes for the product are available and the customer is likely to switch to a competitor’s product in case of increase in price and switch to the entrepreneur’s product in case of decrease in price of his product.

(a)

Explanation: Demand is said to be inelastic when few or no substitutes for the product are available and the customer is unlikely to switch to a competitor’s product in case of increase in price and the entrepreneur enjoys the freedom of charging the price he wants to.

(d)

Explanation: Elastic demand represents poor brand loyalty and the customer will switch to another product easily. Therefore, the pricing must be kept very competitive.

(b)

Explanation: Inelastic demand represents high customer loyalty or lack of competition. In such a scenario, price can be kept high.

(a)

Explanation: For a product with inelastic demand, price can increase with increase in demand. Demand and price are therefore directly proportionate.

(b)

Explanation: For a product with elastic demand, demand will come down with increase in price. The two are therefore inversely proportionate.

(d)

Explanation: A premium product should not be discounted or priced low. Such products should be priced high to represent higher quality and better image. They have to remain ‘aspirational’ in nature.

(c)

Explanation: A premium product should not be discounted. Discounts may damage the image of such products. Many customers take pride in being able to buy expensive things and avoid buying anything that is discounted or priced low.

(d)

Explanation: Premium pricing strategykeeps the price of a product or service artificially high in order to encourage favorable perceptions among buyers is called premium pricing. It is intended to exploit the tendency of buyers to assume that expensive items represent exceptional quality and distinction.

(b)

Explanation: Price skimming is usually usedfor innovative products with high R&D, i.e., research and development costs. The introductory price is kept high which is reduced later when competitors launch similar products or when R&D cost is recovered.

(c)

Explanation: Mass products have to be made affordable for the masses. The price for such products should therefore be kept low.

(a)

Explanation: Mass products often use penetration pricing to get a foothold in the crowded marketplace. Here the initial price is kept low to encourage trial by the customers.

(b)

Explanation: Mass products and low on differentiation and innovation. Such products have to be priced very competitively.

(c)

Explanation: The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, aims to prevent concentration of economic power to the common detriment, provide for control of monopolies and probation of monopolistic, restrictive and unfair trade practice, and protect consumer interest. This act too has to be borne in mind while deciding the pricing.

(b)

Explanation: Few government regulations like controlling the price of essential commodities such as wheat, pulses, potato, onion, oil etc. affect the pricing of these products. But the government’s control is not limited to essential commodities or rich or new businessmen. Government’s regulations apply to all businesses in India.

(d)

Explanation: Wheat is an essential commodity. Other products given here make our lives comfortable but are not essential for our survival.

(a)

Explanation: All the marketing methods such as packaging, advertising, promotions, represent a cost. They therefore influence the price directly.

(d)

Explanation: Premium pricing can be applied to a hi-end mobile with innovative features. Petrol & LPG gas prices are monitored by the government. Newspaper too is not a premium product. It’s a convenience product.

(c)

Explanation: Price mix is decided by the company after considering the framework provided by the government and other market dynamics.

(d)

Explanation: Cost plus pricing method involves calculation of total cost of the product and then adding the desired profit margin to arrive at the selling price.

(b)

Explanation: Price=

20% of Rs 20 is Rs 4. Therefore the price is Rs 20+Rs 4=Rs 24

(d)

Explanation: Price=

30% of Rs. 1200 is Rs 360. Therefore the price is Rs 1200 + Rs 360=Rs 1560

(a)

Explanation: Price= 15% of Rs 12 is Rs 1.80. Therefore the price is Rs 12+Rs 1.80=Rs 13.80

(b)

Explanation: In cost plus profit method the entrepreneur decides the profit margin he wants and then decides the selling price of the product.

(d)

Explanation: Cost plus pricing method is suitable when market conditions are uncertain because under this method, the price can be changed with change in cost due to change in external factors.

(b)

Explanation: When variable pricing method is used, the same product is sold to different customers at different prices. This method is adopted by small manufacturers whose aim is to maximise profits and sales volume.

(b)

Explanation: When variable pricing method is used, the same product is sold to different customers at different prices. The minimum price is decided based on costs, but the maximum price depends on the customer’s paying capacity. This method is adopted by small manufacturers whose aim is to maximise profits and sales volume.

(a)

Explanation: When variable pricing method is used, the same product is sold to different customers at different prices. The minimum price is decided based on costs, but the maximum price depends on the customer’s paying capacity. This method is adopted by small manufacturers whose aim is to maximise profits and sales volume.

(c)

Explanation: Market rate method involves pricing a product or service as per prevailing rate in the market. The price is decided by the leading product in the category.

(a)

Explanation: Under base price and discount method the product is sold below the base price, i.e., the list price at which the producer plans to sell the products. This method is used when the producer faces a problem and wants to push the product in the market.

(b)

Explanation: Trade discount is the discount a company may give a discount to middlemen so that they push the product over competitor’s product. It is used heavily in consumer goods like beverages, automobiles, electronics etc. It’s a part of base price and discount strategy.

(c)

Explanation: Market rate method involves pricing a product or service as per prevailing rate in the market. The price is decided by the leading product in the category.

(a)

Explanation: Companies providing services like courier, taxi etc. commonly use the market rate method for pricing their services. Market rate method involves pricing a product or service as per prevailing rate in the market. The price is decided by the leading product in the category.

(c)

Explanation: Price skimming strategy is usually usedfor innovative products with high R&D, i.e., research and development costs. The introductory price is kept high which is reduced later when competitors launch similar products or when R&D cost is recovered.

(b)

Explanation: Price skimming strategy is usually usedfor innovative products with high R&D, i.e., research and development costs. The introductory price is kept high which is reduced later when competitors launch similar products or when R&D cost is recovered.

(a)

Explanation: Price skimming strategy is usually usedfor innovative products with high R&D, i.e., research and development costs. The introductory price is kept high which is reduced later when competitors launch similar products or when R&D cost is recovered. This strategy can be used when the demand is inelastic and the customers will be willing to pay a higher price for the privilege of using an innovative product.

(d)

Explanation: Under price skimming strategy the introductory price is kept high which is reduced later when competitors launch similar products or when R&D cost is recovered. Products priced using this strategy are likely to be bought by early adopters, i.e., the customers who are willing to pay a higher price for the privilege of using an innovative product.

(d)

Explanation: Under penetration pricing strategy a lower initial pricing is used to capture a large market share that helps in keeping the competition out.

(b)

Explanation: Under penetration pricing strategy a lower initial pricing is used to capture a large market share that helps in keeping the competition out. The low introductory cost helps in getting a foothold in the market crowded with competitors’ products.

(a)

Explanation: Penetration pricing should be used when the firm can increase production capacity with increase in demand and fulfill the additional demand created. It should not be used with an innovative product or when the demand is inelastic.

(d)

Explanation: Premium pricing strategy will be right for launching a luxury hotel. This is the strategy tokeep the price of a product or service artificially high in order to encourage favorable perceptions among buyers. It is intended to exploit the tendency of buyers to assume that expensive items represent exceptional quality and distinction.

(b)

Explanation: Premium pricing strategy is the strategy intended to exploit the tendency of buyers to assume that expensive items represent exceptional quality and distinction. This strategy involveskeeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers. It

(c)

Explanation: The pricing strategy is likely to be different for different stages of the product life cycle. The strategy will change for stages such as introduction, growth, maturity and finally the decline stage.