IB Business and Management Marketing 44B

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Information about IB Business and Management Marketing 44B
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Published on March 19, 2014

Author: keitepai

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PowerPoint Presentation: IB Business and Management .com IB Business and Management T he IB Diploma Business and Management course delivered IN STYLE , ONLINE . © PowerPoint Presentation: z price 4.4 PowerPoint Presentation: z $8.90 Q e Quantity traded Price ($) D S Excess quantity demanded $15.00 Excess quantity supplied $5.00 Market for BK Whopper with cheese value meals Market forces ensure that P e & Q e is established: - ↓ Prices to ↓ excess -Bid up price Equilibrium Supply & demand HL PowerPoint Presentation: z Supply & demand Consumer income State of the economy Price of Substitutes & complements Determinants of demand marketing Fashions, habits, etc. Determinants of supply HL Quality & value for $$ Costs of production barriers to entry Technology (production methods) Taxes & subsidies Price of related goods productivity time PowerPoint Presentation: z Impact of s & d on price Conditions of supply & demand change (e.g. change in economic environment & technological change ) and firms may have to rethink pricing strategy. PowerPoint Presentation: z $8.90 Q Quantity bought Price ($) Demand $12.00 $6.00 Market for BK Whopper with cheese value meals P rice e lasticity of d emand HL Law of demand As the price of a product increases, the quantity demanded decreases; & vice versa PED Informs a business by just how much demand will respond to a change in price; e.g. increase price 15% lose 40% of customers PowerPoint Presentation: z Price elasticity Price elasticity of demand Measures the degree of responsiveness of price ∆s on the quantity sold by firms Price ↑ demand ↓ Price ↓ demand ↑ % ∆ in Q D %∆ in price Revenue = P x q ↓ ↑ ↑ Revenue = P x q ↑ ↑ ↑ PowerPoint Presentation: z Q e Quantity Price ($) D Market for BK Whopper with cheese value meals Price Elasticity HL Q e Quantity Price ($) D Market for petrol Tr Tr Tr Tr Total revenue for a product = price of the product x the quantity sold (PXQ) the larger rectangle indicates the most revenue PowerPoint Presentation: z Price elasticity inelastic 0-1 % ∆ in Q D %∆ in price 1 + elastic Number & closeness of substitutes Degree of brand loyalty & power Proportion of income Time to adjust spending habits degree of necessity ↑ in price will ↑ revenue ↓ in price will ↓ revenue ↓ in price will ↑ revenue ↑ in price will ↓ revenue PowerPoint Presentation: z Income elasticity of demand Measures the degree of responsiveness of income changes on the quantity sold by firms % ∆ in Q D % ∆ in income normal 0-1 1 + luxury negative inferior Predict sales Booms & busts Time e.g. air travel Price discrimination Vietnam vs. Luxembourg PowerPoint Presentation: z Cross elasticity of demand Measures the degree of responsiveness of demand ∆s for one product when price of related product s ∆s Price of Pepsi ® ↑ Demand for Coke ® ? % ∆ in Q d a (coke®) %∆ in price B ( pepsi ®) substitutes positive negative complements Predict sales in relation to price changes in other products Inexpensive ps3 ® consoles & large mark-ups on games ↓ E cross through product differentiation Price of fries ↑ Demand for big macs ® ? PowerPoint Presentation: z Advertising elasticity of demand Measures the degree of responsiveness of demand changes for a product as spent on advertising changes advertising of coke ® ↑ Demand for coke ® ? % ∆ in Q d _ %∆ in advertising $ elastic >1 0-1 inelastic negative number = disaster!! Why??? Difficult to measure, especially across a range of products PowerPoint Presentation: z Advertising investment … Basically, the return on investment PowerPoint Presentation: z The relationship between elasticity & the product lifecycle Growth phase Price inelastic Early adopters considered to be price insensitive Sooo … Assuming the product is innovative & has been carefully supported by promotional campaigns, the firm can expect increasing revenue Saturation phase Competition = substitutes Price Elasticity will ↑ question: 4.4.8, p. 543 question: 4.4.9, p. 545 question: 4.4.10, p. 546 question: 4.4.11, p. 550 question: 4.4.12, p. 551

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