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In economics, a threshold price point is the psychological fixing of prices to entice a buyer up to a certain threshold at which the buyer will be lost anyway. The most common example in the United States is the $??.99 phenomenon—e.g. setting the price for a good at $9.99. Though it is effectively ten dollars—especially when you add sales tax—it still appears to the potential buyer to be significantly cheaper than if the good was sold $10.00.
Economics is the social science that studies the production, distribution, and consumption of goods and services.
A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax.
Economists and advertising analysts note that should a company need to increase the price of a product beyond the threshold price-point, it should only be done in small amounts. If a candy bar originally cost $1.99, then there is apparently little difference in making the new price $2.05 or even $2.25. The logic behind the move is that while some potential buyers will be lost by the increase in price beyond the threshold, those that stay will not notice the difference in prices between thresholds. Buyers do not make judgement calls on a per-cent basis, so will not differentiate between $2.05 and $2.06. However, they do differentiate at thresholds. So while you wouldn't necessarily lose a buyer jumping from $2.05 and $2.06, you could lose one going from $1.99 to $2.00. Therefore companies can actually increase overall profit despite losing customers by increasing the revenue per buyer significantly.
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In economics, specifically general equilibrium theory, a perfect market is defined by several idealizing conditions, collectively called perfect competition. In theoretical models where conditions of perfect competition hold, it has been theoretically demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This equilibrium would be a Pareto optimum.
A deadweight loss, also known as excess burden or allocative inefficiency, is a loss of economic efficiency that can occur when equilibrium for a good or a service is not achieved. That can be caused by monopoly pricing in the case of artificial scarcity, an externality, a tax or subsidy, or a binding price ceiling or price floor such as a minimum wage.
Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds betting or parimutuel betting.
Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets. Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand.
In finance, a put or put option is a stock market device which gives the owner the right, but not the obligation, to sell an asset, at a specified price, by a predetermined date to a given party. The purchase of a put option is interpreted as a negative sentiment about the future value of the underlying stock. The term "put" comes from the fact that the owner has the right to "put up for sale" the stock or index.
Psychological pricing is a pricing and marketing strategy based on the theory that certain prices have a psychological impact. Retail prices are often expressed as "odd prices": a little less than a round number, e.g. $19.99 or £2.98. There is evidence that consumers tend to perceive "odd prices" as being lower than they actually are, tending to round to the next lowest monetary unit. Thus, prices such as $1.99 are associated with spending $1 rather than $2. The theory that drives this is that lower pricing such as this institutes greater demand than if consumers were perfectly rational. Psychological pricing is one cause of price points.
In economics and marketing, product differentiation is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products. The concept was proposed by Edward Chamberlin in his 1933 The Theory of Monopolistic Competition.
Porter's Five Forces Framework is a tool for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. An "unattractive" industry is one in which the effect of these five forces reduces overall profitability. The most unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit levels. The five-forces perspective is associated with its originator, Michael E. Porter of Harvard University. This framework was first published in Harvard Business Review in 1979.
Price points are prices at which demand for a given product is supposed to stay relatively high.
Price war is "commercial competition characterized by the repeated cutting of prices below those of competitors". One competitor will lower its price, then others will lower their prices to match. If one of them reduces their price again, a new round of reductions starts. In the short term, price wars are good for buyers, who can take advantage of lower prices. Often they are not good for the companies involved because the lower prices reduce profit margins and can threaten their survival.
A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a corporation whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over the counter markets. In some jurisdictions, public companies over a certain size must be listed on an exchange. A public company can be listed or unlisted.
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. In simple language, a hedge is a risk management technique used to reduce any substantial losses or gains suffered by an individual or an organization.
A timeshare is a property with a divided form of ownership or use rights. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each owner of the same accommodation is allotted their period of time. The minimum purchase is a one-week ownership, and the high-season weeks demand higher prices. Units may be sold as a partial ownership, lease, or "right to use", in which case the latter holds no claim to ownership of the property. The ownership of timeshare programs is varied, and has been changing over the decades.
The unique selling proposition (USP) or unique selling point is a marketing concept first proposed as a theory to explain a pattern in successful advertising campaigns of the early 1940s. The USP states that such campaigns made unique propositions to customers that convinced them to switch brands. The term was developed by television advertising pioneer Rosser Reeves of Ted Bates & Company. Theodore Levitt, a professor at Harvard Business School, suggested that, "Differentiation is one of the most important strategic and tactical activities in which companies must constantly engage." The term has been used to describe one's "personal brand" in the marketplace. Today, the term is used in other fields or just casually to refer to any aspect of an object that differentiates it from similar objects.
In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time.
A business can use a variety of pricing strategies when selling a product or service. The price can be set to maximize profitability for each unit sold or from the market overall. It can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market.
Point of difference refers to the factors of products or services that establish differentiation. Differentiation is the way in which the goods or services of a company differ from its competitors. Indicators of the point of difference's success would be increased customer benefit and brand loyalty. However, an excessive degree of differentiation could cause the goods or services to lose their standard within a given industry, leading to a subsequent loss of consumers. Hence, a balance of differentiation and association is required, and a point of parity has to be adopted in order to allow a business to remain or further enhance its competitiveness.
The six forces model is an analysis model used to give a holistic assessment of any given industry and identify the structural underlining drivers of profitability and competition. The model is an extension of the Porter's five forces model proposed by Michael Porter in his 1979 article published in the Harvard Business Review "How Competitive Forces Shape Strategy". The sixth force was proposed in the mid-1990s. The model provides a framework of six key forces that should be considered when defining corporate strategy to determine the overall attractiveness of an industry.
Value-based price is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices. Where it is successfully used, it will improve profitability through generating higher prices without impacting greatly on sales volumes.
This article describe the process of electronic auction (E-Auction),which is introduced to negotiate terms of contract between suppliers and buyers mainly in the industrial sector.