1. Factors Affecting Price

2. Costs and expenses – break-even point

3. What is the break-even point? Point at which sales revenue equals costs and expenses. Total costs and expenses/# products produced or sold

4. Example Hats R Us is expecting to produce and sell 15,000 baseball caps with various team logos. The costs and expenses associated with the production and sale of the hats is $45,000. What is the break-even point to set the price?

5. Total Costs and Expenses / expected production $45,000 / 15,000 = $3.00

6. Costs and expenses – break-even point Consumer Demand – elasticity - the degree to which demand for a product is affected by its price

7. Costs and expenses – break- even point Consumers’ Demand – elasticity Consumer value perception – subjective Competition – price wars Government regulations

8. Government Regulations and Ethics

9. Price Fixing Competitors agree on certain price ranges within which they set their own prices. Collusion – communication among competitors to establish a fixed price Made illegal by the Sherman Antitrust Act of 1890 because it eliminates competition

10. Price Discrimination Company charges different prices to similar customers in similar situations Made illegal by the Clayton Antitrust Act of 1914 because it creates unfair competition. Strengthened by the Robinson-Patman Act of 1936

11. Resale Price Maintenance Disallows manufacturers from forcing retailers to charge a specific retail price Resulted in the establishment of the “Manufacturer’s Suggested Retail Price” (MSRP)

12. Minimum Price Laws Enacted in some states to disallow retailers from selling below cost Where allowed, items priced at cost are called loss leaders. Purpose is to attract customers in hopes they will buy other items.

13. Unit Pricing Allows consumers to compare similar goods packaged in various sizes or forms by using a standard unit of measure

14. Price Advertising Laws established by Federal Trade Commission (FTC) Bait-and-switch illegal

15. Factors Affecting Price