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In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labor. Businesses often set prices close to marginal cost during periods of poor sales.
Unit price is a common form of valuation in sales contract for goods sold in bulk purchasing. The stock price of securities is a form of unit price because securities including capital stocks are often sold in bulks comprising many units. [4] Unit price is also often used in the trade of consumable energy resources. [5]
Unit price information printed on supermarket shelf labels (price tickets) illustrates the quantity of product by a unit of measure (price per 100 g, price per 100 ml). Unit pricing was originally designed as a device to enable customers to make comparisons between grocery products of different sizes and brand, hence enabling informed purchase ...
A niche market [note 1] is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that it is intended to target. It is also a small market segment. Sometimes, a product or service ...
Complete discrimination: seller prices each unit at a different price, so that each user purchases up to the point where the user's marginal benefit equals the marginal cost of the item; Direct segmentation: seller conditions price on some attribute (e.g., age or gender) that directly segments the buyers;
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. [1]
The per-unit cost will be lower in scale economies due to the spread of fixed costs to larger volumes, technology efficiencies and better supplier terms, therefore new entrants join the industry either on a large scale or at a cost disadvantage. [8] Cost advantages can sometimes be quickly reversed by advances in technology.
Reduction in price increases the quantity demanded, but reduces payments by those who would be willing to pay a higher price: MR < P. Marginal cost (MC) relates to the firm's technical cost structure within production, and indicates the rise in total cost that must occur for an additional unit to be supplied to the market by the firm. [1]