Price Point
Categories: Econ, Company Management
What are you willing to pay for shoes? There are many things to consider: comfort, availability (in your size), style, and price. Sometimes, low comfort and high price are acceptable if the style situationally is most important (think: red stilettos for February 14th). In other situations, price and availability are the key variables (flip-flops at Walgreens in summer, for cheap).
Fast-forward to next year. The prices of both the red stilettos and the flip-flops have increased. For the firm selling red stilettos, this was a smart move. While the increase in price caused demand to drop a little, their overall revenue from red stilettos was still more this year than last year. So it was worth it.
The flip-flops are another story—everyone substituted Walgreens flip-flops for the cheaper Walmart flip-flops. Demand for the Walgreens flip-flops dropped a lot, and they made less revenue from them this year compared to last year. That means the sales dropped more than the proportional price increase, so...not worth it. Whoops, shouldn’t have passed the price point.
A company’s price point is the point at which, if a company raised the price of a product, it wouldn’t be worth it: the sales decreased more than the proportional amount of the price increase. Not very profit-maximizing of them.
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Cost Accounting: What is Price Discrimin...4 Views
And finance Allah shmoop What is price discrimination Oh well
it's kind of like any other form of discrimination on
ly with pricing Same product sold to different people at
different prices Those hundred golf balls at the range Yeah
there for students there Ten bucks for non students Fourteen
bucks They're not fair What about loans Democrats have hired
default rates than Republicans Is it fair to charge Democrats
higher loan rates Same product different price Well what about
hot dogs The hot dog vendor sizzle in Weiner's charges
Two bucks a dog for its white customers and five
bucks a dog for well everyone else Fair Not fair
Yeah that one's easy Not fair not legal What if
you had the opposite hot dog company one that wanted
to charge racist Mohr than non racist How about that
Fair Not fair Interesting Legally Not fair and not really
practical Most racist Don't wear an identifying armband Okay well
what about airlines Buying airline tickets Way in advance then
your Ah planner You get one price Maybe you're a
nervous Nellie and terrified you don't get the seven a
m to JFK six months from now so prices segmented
Teo you are high Or maybe you're a bargain hunter
willing to commit way in advance in return for a
discount Well different segment prices then are probably cheap too
You What about bar night entry fees Remember all of
those women get in free price discriminatory pricing nights Well
their intent was to change the bar scene from being
like eighty seven horny drunk men and well three terrified
women to making the social mores a bit more balanced
or evenly spread out So bars tried to balance things
by offering free entry to women But of course some
full sued the bars and claimed the practice was priced
discriminatory and one So yeah here's what those same bars
look like today So yeah that's price discrimination laws A
little bit unclear Yes Slippery slope and all that You've
got to do some thinking here to figure out what's 00:02:07.533 --> [endTime] fair and what's not eh