equilibrium price

(noun)

The price of a commodity at which the quantity that buyers wish to buy equals the quantity that sellers wish to sell.

Examples of equilibrium price in the following topics:

  • The Influence of Supply and Demand on Price

    • This results in an economic equilibrium of price and quantity.
    • If demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity.
    • If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.
    • If demand remains unchanged and supply increases, then it leads to lower equilibrium price and higher quantity.
    • If demand remains unchanged and supply decreases, then it leads to higher equilibrium price and lower quantity.
  • Pricing During Difficult Economic Times

    • A model of pricing based on 'rational' economic theory suggests that prices are set by the forces of supply and demand, and individual companies in a perfectly competitive market must follow the equilibrium price.
    • Sometimes prices go up and people buy more, and vice versa.
    • By knowing what value a company delivers to its customers, it can price more confidently and not panic into slashing prices when it does not necessarily need to.
    • Price-cutting may even lead to price wars where nobody wins.
    • Slashing prices on low value goods (while maintaining prices on high value goods) is a potential pricing strategy during difficult economic times.
  • Demand-Based Pricing

    • Demand-based pricing, also known as customer-based pricing, is any pricing method that uses consumer demand - based on perceived value - as the central element.
    • These include: price skimming, price discrimination, psychological pricing, bundle pricing, penetration pricing, and value-based pricing.
    • Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.
    • Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
    • By definition, long term prices based on value-based pricing are always higher or equal to the prices derived from cost-based pricing.
  • Psychological Pricing

    • Psychological pricing is a marketing practice based on the theory that certain prices have meaning to many buyers.
    • Inferring quality from price is a common example of the psychological aspect of price.
    • Another manifestation of the psychological aspects of pricing is the use of odd prices.
    • We call prices that end in such digits as 5, 7, 8, and 9 "odd prices. " Examples of odd prices include: $2.95, $15.98, or $299.99 .
    • Psychological pricing is one cause of price points.
  • Competitor-Based Pricing

    • Competition-based pricing describes a situation where a firm has a pricing policy that reflects the pricing decisions of competitors.
    • Competition-based pricing describes the situation where a firm does not have a pricing policy that relates to its product, but reflects the pricing decisions of competitors.
    • Similar to competition based pricing, going rate pricing reflects the price that is being used by most of the companies within the industry, an industry standard more or less.
    • It can lead to price wars.
    • Show the basis of competitor-based pricing as a general pricing strategy
  • Cost-Based Pricing

    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Cost-based pricing involves setting a price such that:
    • Cost-based pricing is included in what is considered the "3 C's" of pricing.
    • Describe cost based pricing as it relates to general pricing strategies
  • High/Low Pricing

    • High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.
    • High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors.
    • The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
    • High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms.
    • The way competition prevails in the shoe industry is through high-low price.
  • Value-Based Pricing

    • Value-based pricing seeks to set prices primarily on the value perceived by customers rather than on the cost of the product or historical prices.
    • Value-based pricing sets prices primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.
    • How important is price?
    • Examples include matching the price of competitors, a traditional price charged for a particular product, and charging a price that covers expected costs.
    • Examine the rationale behind value based pricing as a pricing tactic
  • Settling the List Price

    • A list price must be close to the maximum price that customers are prepared to pay and yield the maximum profit for the retailer.
    • Pricing is a key variable in micro-economic price allocation theory and part of the four "P's-" of the marketing mix; pricing, product, promotion and place.
    • The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends to the retailer.
    • Retailers must ask questions to set a list price.
    • A good pricing strategy is one that strikes a balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).
  • Terms Used to Describe Price

    • We've been using the word "price" a lot.
    • The price of an item is also called the price point, especially where it refers to stores that set a limited number of price points.
    • Price is relatively less than the cost price.
    • Service providers may present you with a fee list as opposed to a price tag if you ask for the price of their services.
    • The price to ride a bus is expressed by the term "fare
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