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Enrollment No.

: Pugazhendi (Moorthy)

MBA Information Systems 1st Year Assignment
Annamalai University

2: Managerial Economics

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MBA Information Systems – Managerial Economics

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but could also be higher tax rates. These price rises cause the value of money to fall. The literal meaning of the word inflation is to blow up or get bigger. Impact of Inflation on Economy MBA Information Systems – Managerial Economics Page | 2 . Answer:Inflation in brief Inflation means a reduction in the value of money. you still have the same amount of actual currency. so the company cannot simply compensate you with additional currency to compensate for the loss of value. Purchasing power only declines if wages rises less rapidly than prices. in terms of the goods and services you are able to purchase with it.: Pugazhendi (Moorthy) Question #3: Explain how inflation will affect the economy of a country with suitable examples.grows faster than production in that country. you are not making more or less money at your job or splurging for excessive. unnecessary items. a rise in general price levels. For example. but still noticeable rate. only to have the clerk tell you the candy bar now costs 5 dollars. Inflation can also be caused by higher costs being charged on to the end-user. You can therefore buy less with the same amount of money. the average price will rise as a result of the increased demand for goods and services. If the amount of money in a country . but nonetheless demonstrates the importance of 1 dollar consistently holding the same monetary value. For example. the primary reason that inflation affects the economy so negatively is the loss of value. you will need to rearrange your budget. Currency and Economy If the money you have becomes worth less. Typically. These might be raw material costs or production costs which have risen. imagine going to the store and purchasing a 1 dollar candy bar.the money supply . This is an extreme example of how inflation can affect the economy. The result is a snowball effect. However. in other words. Since it is worth less. inflation occurs at a much more gradual. you need to use more currency to purchase the same items you always have. because inflation affects your boss too.Enrollment No. Affect of Inflation on Currency Westernized countries have economies based on the value of the currency used to purchase goods. The economic system of the country relies on the value of the money they use to stay the same. your money is simply worth less. But this does not need to have an immediate effect on purchasing power. The candy bar hasn't gotten more expensive.

due to our currency having a higher value. inflation is between 3-10% a year. Hyperinflation MBA Information Systems – Managerial Economics Page | 3 . According to the U. That's because this mild inflation sets expectations that prices will continue to rise. mild inflation drives economic expansion. For example.S. America may pay a company in another country to manufacture items and pay their employees 10 dollars a week. By increasing demand. Galloping Inflation When inflation rises to ten percent or greater. it sparks increased demand as consumers decide to buy now before prices rise in the future. walking. Walking Inflation This type of strong. As a result. it wreaks absolute havoc on the economy.Enrollment No. galloping. It is harmful to the economy because it heats up economic growth too fast. but they are actually causes of inflation. America may need to pay these same workers 20 dollars a week to provide the same value that 10 dollars once did. The economy becomes unstable. so that suppliers can't keep up. Federal Reserve.: Pugazhendi (Moorthy) Inflation impacts the economy so significantly because economies are organized based on the value of currency. and government leaders lose credibility. both within and outside of the country. This drives demand even further. as is expansion of the money supply. As a result. and hyperinflation. Following an extreme period of inflation without recovering to economic stability. While most Americans would scoff at that type of compensation. Money loses value so fast that business and employee income can't keep up with costs and prices. this is acceptable to those receiving the payment. More important. There are also many types of asset inflation and of course wage inflation. just to avoid tomorrow's much higher prices. or pernicious. Many experts consider demand-pull and costpush to be types of inflation. depriving it of needed capital. Types of Inflation Inflation is when the prices of goods and services increase. Creeping Inflation Creeping or mild inflation is when prices rise 3% a year or less. we negotiate all financial interactions based on the worth of our dollar to another country's currency. People start to buy more than they need. Foreign investors avoid the country. Therefore. categorized by their speed: creeping. when prices rise 2% or less. There are four main types of inflation. neither can wages. common goods and services are priced out of the reach of most people. Galloping inflation must be prevented. it's actually beneficial to economic growth.

It's caused when an asset bubble bursts. CEOs effectively control their own pay by sitting on many corporate boards.a month. Stagflation Stagflation is just like its name says: when economic growth is stagnant. if not impossible. A worker shortage occurs whenever unemployment is below 4%. especially their own. Wage Inflation Wage inflation is when workers' pay rises faster than the cost of living. and can cause prices of the company's goods and services to rise. went off the gold standard. it is harder to stop than inflation. the Fed was worried about overall deflation during the recession. Why would prices go up when there isn't enough demand to stoke economic growth? It happened in the 1970s when the U. However.Enrollment No. Once deflation starts. Core Inflation The core inflation rate measures rising prices in everything except food and energy. MBA Information Systems – Managerial Economics Page | 4 . higher wages are one element of costpush inflation. That's what happened in housing in 2006. All of these situations created wage inflation. That's because gas prices tend to escalate every summer. Examples of hyperinflation include Germany in the 1920s.S. usually driving up the price of food and often anything else that has large transportation costs. It is fortunately very rare. or when workers effectively control their own pay. Because it was such an unusual situation. That's because deflation can turn a recession into a depression. Of course. In fact.and kept it there long enough to dispel expectations of further inflation. In fact. Zimbabwe in the 2000s. when labor unions negotiate ever-higher wages.a year. The Federal Reserve uses the core inflation rate to guide it in setting monetary policy. This increase in the money supply was one of the causes of inflation. Labor unions negotiated higher pay for auto workers in the 90s. most examples of hyperinflation have occurred when the government printed money recklessly to pay for war.and you wouldn't want it to. Deflation in housing prices trapped those who bought their homes in 2005.: Pugazhendi (Moorthy) Hyperinflation is when the prices skyrocket more than 50% -. This seems contradictory. but there still is price inflation. prices dropped 10% -.it's when prices fall. The Fed doesn't want to adjust interest rates every time gas prices go up -. it probably won't happen again. Stagflation didn't end until then-Federal Reserve Chairman Paul Volcker raised the Fed funds rate to the double-digits -. Deflation Deflation is the opposite of inflation -. and during the American Civil War. Once the dollar's value was no longer tied to gold. During the Great Depression of 1929. This occurs when there is a shortage of workers. the number of dollars in circulation skyrocketed. everyone thinks their wage increases are justified.

On Working Class Working class suffer during inflation. Prices of goods increase at faster rate during the period of inflation and the cost of production lags behind as wages. Effects of Inflation Inflation has good as well as bad effects on the economy. However. political uncertainty in the oil-exporting countries drove gas prices higher in 2011 and 2012. The rest is distribution and taxes. Further. insurance etc. The condition is MBA Information Systems – Managerial Economics Page | 5 . oil prices are responsible for 72% of gas prices. you can expect gas prices to rise ten cents per gallon each spring. It is often overlooked by the Federal Reserve and other inflation-watchers when the overall rate of inflation is low. What do oil prices have to do with gas prices? A lot. inflation is a blessing in disguise to the business class at the initial stages. speculators gain during inflation because of (a) windfall profits and (b) appreciation in the value of their stock. asset inflation can be very damaging if left unchecked. as their wages do not rise proportionately with the rise in prices and cost of living.Enrollment No. which aren't as volatile as oil prices. Thus. Let’s see effects of inflation on various sections of the society On producers Inflation is a period of boom and prosperity for the producing classes. All businessmen. businessmen try to appreciate the value of their stock. Prices hit an all-time peak of $4.17 in July 2008. thanks to economic uncertainty. However.: Pugazhendi (Moorthy) Asset Inflation An asset bubble. as we saw in the subprime mortgage crisis and subsequent global financial crisis. with the fall in the value of money. traders. In the initial stages. Whereas other unorganized groups like self employed and agriculture labours find it very difficult during inflation. Asset Inflation -. occurs in one asset class. In fact. But the trouble is that the rise in prices is not uniform throughout the economy and there may be distortions due to inflation causing many imbalances. are almost fixed. Normally. These days workers of the organized group do not suffer much as they react faster during the inflation. such as housing. Inflation is good up to the stage of full employment. there is a time-lag between a rise in the prices of commodities and rise in the cost of production. interest. or asset inflation. In fact. This gives enormous scope for windfall gain.Gas Gas prices rise each spring in anticipation of the summertime vacation driving season. mild inflation may create an all-round expansion of business activity and this proves beneficial to the economy. oil or gold.

as their fixed purchasing power decline in the face of mounting cost of living. The producing and trading classes gain at the expense of salaried fixed income groups. When prices rise. Alternatively they would cut the size of the projects and programmes to meet with the original budgeted expenditure. It makes rich richer and poor poorer. Due to enormous rise in prices and scarcity of essential commodities. on investments. Since rise in price and rise in income may not be uniform in all sectors and sections of the economy there will be distortions and imbalances causing bottlenecks in distribution and fluctuation in production and effective distribution. hoarding and profiteering. fixed interest. On fixed income groups This is the worst hit class during inflation. pensioners. On debtors and creditors During the inflationary period the debtors (borrowers) gain much while creditors (lenders) lose heavily.Enrollment No. it has baneful influence on society. which form the bulk of the society become the worst sufferers. during inflation the price of industrial goods go up rapidly and prices of agriculture produce are not so flexible. as it is a largest borrower as we have in the case of debtors. salaried class like teachers and government employees find inflation and rising in prices very agonising. MBA Information Systems – Managerial Economics Page | 6 . the real value of money falls and the debtors have to pay money which has less purchasing power. There is an all-round frustration among the salaried and fixed income groups.: Pugazhendi (Moorthy) equally distressing for those workers. This will be beneficial to debtor while the creditor will be getting back amount whose value of purchasing power has declined. On other hand government will be benefited during inflationary period. The returns of farmers diminish and their economic condition deteriorates due to mounting cost of commodities and industrial product which they must buy. For instance. called the middle income group. Social Consequence If inflation is persistent and severe. The public sector undertaking may have to raise the expenditure level due to a fall in the value of money. On Distribution Inflation has bad effect on distribution too. People living on past savings. there is black-marketing. The net result will be that some classes enjoy the benefits of inflation while others suffer from it. Thus there is transference of income from poor to rich. Inflation becomes social menace and political problem if necessary steps are not taken. who have little bargaining power from their organizations. This class of people. On Government The government too will be affected by the inflation.

Import. the interest rates cannot be far behind.: Pugazhendi (Moorthy) Effects of inflation on Economy of a country Inflation and the economy of a country are closely related. Inflation and the economy both influence all the major macroeconomic indicators of a country. In other words. it affects the living standards of the people. Debt Inflation not only affects the macroeconomic indicators.20% 1970 19708. When exchange rates are affected. This in turn influences trade. Capital Investment. The effect on the economy of any country is not immediate or it does not affect the economy overnight. resulting in a dramatic decrease in demand. The exchange rates of all currencies also change. Since 1950. Demography. The economy of a country is affected by inflation in a number of ways. The various macroeconomic indicators include the following: Gross domestic product or GDP.00% 19501960 19607. the inflation in Indian economy has been in single digits for most of the years. There is a cumulative effect. Housing prices increases substantially from 2002 onwards. Industrial production. Several such changes build up to bring about a big change. hovered around 6-6.Enrollment No. Agricultural production. India after independence has had a more stable record with respect to inflation than most other developing countries.8%. well above the level of 5-5.5% MBA Information Systems – Managerial Economics Page | 7 . Inflation and its effect on economy are enormous. Consumer price indices. Export. all events are interlinked and the entire economic cycle gets upset. For Example: The mortgage crisis of 2007 in USA could best illustrate the ill effects of inflation. the inflation rate.50% 1980 In early 2007. Inflation rate 2. as measured by the wholesale price index (WPI). in India. as shown in the following table Period Avg. Producer price index (industrial).

According to analysts. the main cause of high inflation in India used to be rises in global oil prices. Inflation in India a menace a few years ago is at a 30 year low. in early 2007.91 % in August 2008. Though the measures taken by the GoI were targeted at inflation. took several measures to contain inflation. In the past. would help reduce domestic prices of goods. For example. the country's central bank. together with the RBI. especially the ones leading to higher interest rates. while stagnant agricultural productivity was behind the supply constraints. The Government of India. bringing in a sigh of relief to policymakers.Enrollment No. fuel and cement prices too recorded high increases. the Government of India reduced import duties on several food products and cut the price of diesel and petrol. However.61% in the week ended May 9. some analysts feared that some of these measures. in turn. The RBI also chose not to intervene when the Indian Rupee rallied against the US Dollar between March 2007 and May 2007. the chief component of the inflation was the increase in the prices of food articles caused by increased demand as well as supply constraints. On February 15. might induce recession in the Indian economy. 2007. MBA Information Systems – Managerial Economics Page | 8 . There were others who felt that letting the Rupee rise would not only have a negative effect on the bottom lines of companies that earn a substantial percent of their profits from exports.: Pugazhendi (Moorthy) that would have been acceptable to the Reserve Bank of India (RBI). which. Following diagram illustrates current inflation rates in India. Apart from the rise in prices of food articles. the increased demand was due to high economic growth and increased money supply. The inflation ended at a low of 0.73%. The decision not to intervene was based on the idea that a stronger Rupee would bring down the cost of imports. but also impact the longterm competitiveness of Indian exports. the inflation rate reached a two-year high of 6. 2009 this after reaching a 16 year high of 12. the RBI increased the Cash Reserve Ratio (CRR) and repo rates in an effort to check money supply.

: Pugazhendi (Moorthy) INDIA STOCK MARKET (SENSEX) **** END OF ANSWER **** Question #4: Explain pricing methods and which method will be suitable in present age? Answer:MBA Information Systems – Managerial Economics Page | 9 .Enrollment No.

Under this method. The various pricing methods usually employed by businessmen are Methods Based on Cost  Cost-Plus or Full-Cost pricing  Target pricing or pricing for a rate of return  Marginal pricing Methods Based on Competition and Market  Going-rate pricing  Customary pricing  Differential pricing Methods Based on Cost Cost-Plus or Full-Cost pricing: The full-cost pricing method is generally adopted by many of the firms for its simplicity and ease. Demand.: Pugazhendi (Moorthy) Introduction There are many practical pricing methods adopted by the firms. Competition. These percentages vary from firm to firm and product to product in the same firm. Pricing Methods Generally businessmen prefer a pricing procedure which is easy to implement and requires only few assumptions on demand. Every firm sets certain objectives and tries to accomplish them. establishing a favourable image with the public or limiting competition. Thus. Firms using this method should take the following costs into consideration. Which means the selling price of the product is computed by adding percentage to the average total cost of the product. based on different considerations. the optimum mix of these factors varies according to the nature of the products markets and the overall objective of the firm. the firm is guided by some objectives such as. profit maximisation. The percentages added to the cost are called margins or markups. the job for the management is to develop and adopt an appropriate pricing method that meets the needs of the company. Formulating price policy and adopting a particular pricing method is often a critical factor in the successful operation of a business organization. the price is set to cover all costs (material. Margin pricing and Mark-up pricing. While fixing the price. sales maximisation.  Variable and fixed production costs MBA Information Systems – Managerial Economics P a g e | 10 . This method is also called Cost-plus pricing.Enrollment No. and Profit).e. Even though the basic problem of pricing is the same for all firms (i. etc. labour and overhead) and predetermined percentage for profit. Costs.

in turn.: Pugazhendi (Moorthy)  Variable and fixed selling and administrative costs The mark-up of profit is determined based on variety of considerations.  This method safeguards the interest of the firm against risks due to uncertain demands.  Cost is regarded the main factor influencing the price. monopsony buying and public utility buying.  This method is best while dealing with uncertainty and ignorance. the percentage of profit is marked up arbitrarily. the companies determine the average mark-up on costs necessary to produce a desired rate of return on the company’s investment. and the estimated number of units to be produced is 50. In the case of rate of return method. Target pricing or pricing for a rate of return: This method of pricing is only a refinement of the full-cost pricing. depends upon the quantity demanded. It may be based on common tradition laid down in particular business or it may be determined by trade associations or guide lines if any provided by the government. Which means price determines quantity demanded. the variable costs add up to Rs100000. custom design products. Drawbacks  Totally ignores influence of demand. In the case of full-cost pricing. According to this method manufacturer considers a pre-determined target rate of return on capital invested.000. divide Rs8 by 1 minus .20.  Undue importance is given for the precision of allocating of costs.  It is easy for application by all types of firms. MBA Information Systems – Managerial Economics P a g e | 11 . If the desired return on sales is 20%.  It ignores marginal or incremental cost and uses average cost instead. Advantages  It helps in setting fair and plausible prices. divide by 50000. In spite of drawbacks this method is useful in product tailoring. For example: The fixed costs to produce an item are Rs300000.Enrollment No. and the true unit cost equals Rs8. price charged is dependent upon cost per unit and the cost.  This method is based on circular reasoning. and the cost-plus price for this item will be Rs10.  If adopted by all businessmen. Add Rs100000 to Rs300000.  It economical for decision making. it may help protect the firms against price wars or self damaging price competition and at the same time it provides flexibility to adjust price based on variation of costs.  Fails to reflect the forces of competition adequately.

the price of a product is determined on the basis of the marginal or variable costs. future costs.22.  Revising the prices to achieve estimated sales to maintain percentage of profit. Their relevance to pricing decision is limited. Davis and Hughes have used the following formula to calculate the desired rate of return when a mark-up is applied on cost Percentage mark-up on cost = Capital employed Total annual cost x Planned rate of return For Example: Suppose the capital employed by a firm is Rs.: Pugazhendi (Moorthy) In this case the company estimates future sales. Marginal Cost Pricing Under marginal cost pricing method. three different methods are followed  Revising the prices to maintain constant percentage mark-up over costs. as pricing decision requires planning the future.Enrollment No. and arrives at a mark-up that will achieve a target return on the company’s investment.  Revising the prices to achieve a constant rate of return on capital invested Changed percentage may be computed as below  Percentage over cost  Percentage on sales  Percentage on capital employed = Profits / Costs = Profits / Earnings from sales = Profits / Capital employed The major drawback of this procedure is that it ignores demand condition. In any business price policy is profit oriented. the MBA Information Systems – Managerial Economics P a g e | 12 . A company cannot blindly stick to the mark-up which has been decided based on the capital employed. Change of costs compels company to revise the prices. In this method fixed costs are totally ignored and only variable costs are taken in to consideration. To overcome this problem. Then percentage mark-up is = (6/12) * 20 = 10% Now suppose the total cost per unit in the firm is Rs.6 lakhs and total annual cost id Rs. Under marginal cost pricing.12 lakhs with a planned rate of return of 20 percent.20 with 10 percent mark-up the selling price would be Rs. This is done on the assumption that fixed costs are caused by outlays which are historical and sunk.

 This method enables the firms to face competition. better to offer passengers chance of flying at Rs12. This is possible only when lowest possible price is charged. The long-run situations are often unpredictable.50 and fill the seat than not fill it at all! Advantages  Marginal cost pricing is highly useful for public utility undertakings. This is the reason why export prices are based on marginal costs since international market is highly competitive.75 MC of each passenger = 2000/160 = Rs12. It helps them in maximising output and better capacity utilization. Each stage of the life-cycle has separate fixed cost and shortterm marginal cost.  In business. which helps in maximising public welfare.: Pugazhendi (Moorthy) objective of the firm is to maximise its total contribution to fixed costs and profit.Enrollment No. and the optimal relationship between costs and prices will vary substantially both among different products and different markets. For Example: Aircraft flying from Delhi to Kochi Total Cost (including normal profit) = Rs15. In the modern business marginal is cost pricing method is more effective compares to full-cost method due to following two characteristics  The prevalence of multi-product. Hence. short-run marginal cost pricing is most suitable. The total cost of separate products can never be estimated perfectly and satisfactorily.000 of which Rs13. multi-process and multi-maker concerns makes the absorption of fixed costs into product costs is absurd. Limitations MBA Information Systems – Managerial Economics P a g e | 13 . In this type of business.  This method helps in optimum allocation of resources and as such it is the most efficient and effective pricing technique and it is useful when demand conditions are slack. proposals to changing the prices in terms of sales and segmentation of the market can be profitability employed only with short-run problems and marginal pricing is the most suitable method of short-run pricing. average price = Rs93.  Marginal cost pricing is suitable for pricing over the life-cycle of a product. dominant force is innovation combined with constant technology.000 is fixed cost* Number of seats = 160. The lowest limit is set by marginal cost of the product.50 If flight not full.

In spite of its advantages.  Marginal cost pricing requires a better understanding of marginal cost technique. Therefore. When products are identical. Some accountants are not fully conversant with the marginal techniques themselves. It is confined to cases of special orders only. due to its inherent weakness of not ensuring the coverage of fixed costs. long-playing records.  It is suitable to avoid price hazards in oligopoly market. set at discrete intervals. Advantages  It helps in avoiding cut-throat competitions among the firms.Enrollment No. automobile.: Pugazhendi (Moorthy)  Firms may find it difficult to cover up costs and earn a fair return on capital employed when they follow marginal cost principle in times of recessions when demand is slack and price reduction becomes inevitable to retain business. where the products have reached a stage of maturity and where both customers and rival produces have become accustomed to stable price-relationship. they are not capable of explaining their use to the management. MBA Information Systems – Managerial Economics P a g e | 14 .  When production takes place under decreasing costs. For Example: Going-rate pricing include industries like clothing. Normally. marginal pricing has not been adopted extensively. Other firm accepts the leadership. marginal cost pricing is unsuitable since MC curve will be below the AC curve and marginal cost pricing is bound to lead to deficits. Firms make necessary price adjustment to suit the general price structure in the industry. Hence this going-rate pricing method is also called as Acceptance-pricing.  Going-rate or acceptance pricing is less troublesome and less costly since exact calculation of costs and demand is not necessary. prices will form a series. The emphasis here is on the market. unique selling price will rule. under this method..  It is a rational pricing method when costs are difficult to measure. the industry tries to determine the lowest price that the seller can afford to accept considering various alternatives. Methods Based on Competition and Market Going-Rate pricing This method of pricing conforms to the system of pricing in oligopoly where a firm initiates price changes and other firms in the industry follow the pattern set by the leader. etc. When they are differentiated.

Customary price may be maintained even when products are changed. time in sales cycle. but as a result of their having prevailed for a considerable period of time. An important aspect of differential price is price discrimination. price match guarantees." Differential pricing tactics can be grouped as:  Requiring customers to jump hurdles (coupons. markets or buying situations. distribution outlet).Enrollment No. MBA Information Systems – Managerial Economics P a g e | 15 . Hence. Those who drop out are in essence saying.) or purchased prepaid discount passes from Super Market can all be sitting next to each other watching the same movie. student. going along with the old price is the easiest thing to do. Differential Pricing Identical products are priced differently for different types of customers. under 12 and AAA etc. not by deliberate action on the seller’s part. Offering this spectrum of prices enables cinemas to maximize profits by serving customers with a variety of different valuations. used coupons. customers who paid full price. "I know others are willing to pay higher prices. Only when the costs change significantly.: Pugazhendi (Moorthy) Customary Pricing Price of certain goods becomes more or less fixed for a considerable period of time. While changing the customary price. rebates. but I just don't value the item as much as they do. Everyone has the same information and bids on the same item. This is usually so even in the face of lower costs. the customary prices of these goods are changed. received discounts (senior. For Example: The new model of a mobile phone may be priced at the same level as the discontinued model. A low price may cause an adverse reaction on the competitors leading them to a price war as also on the consumers who may think that quality of the new model is inferior. Differential pricing enables companies to profit from their customers' unique valuations by offering different customers different prices for the same product. Another approach is to effect price change only in a limited market segment and know the customer reaction to decide whether any change would be digested by the market. sales. As prices increase. Consider the pricing behaviour at an auction. bidders drop out. it is necessary to study the pricing policies and practices adopted by the competing firms. For Example: At a cinema.

 Cover the Basics: The three basics of pricing are product price.  Selling characteristics (discounts for volume purchases.  Listen to the Customer: Make a point of noting customer comments in a journal or file.  Boost the Records: Good recordkeeping will help to set a price and to track the performance of the pricing. razor/razor blade pricing.  Selling strategy (negotiation. The end result of implementing these four strategies is a multi-price strategy.  Do the Homework: Keep good notes of how the price arrived so it can make similar assumptions in the future. I mean a set of publicly known prices and plans for a company's products composed of: (1) a value-based price.: Pugazhendi (Moorthy)  Customer characteristics (different prices based on where customer lives. purchasing history). MBA Information Systems – Managerial Economics P a g e | 16 . time.Enrollment No.  Be flexible: Constantly review both internal and external factors and calculate how a price change would affect the new situation. The range of prices created by differential pricing contributes to the pricing windfall with larger margins from higher prices and growth by using discounts to sell to more customers. You need to balance the costs of producing a product with competition and the perceptions of your target customer to select the right product price. (3) versions. metering. Review them periodically to glean new ideas. good recordkeeping and flexibility. By this. affiliations. Tips for Successful Pricing Good product prices are important to any successful business. readily available traits such as age. research. Blend pricing methods to ensure the three basics are in balance.  Be Creative: Think of new ways to sell more to existing customers or to attract new customer groups. different next best alternatives). Follow these tips to ensure greater pricing success. (2) new pricing plans. and dynamic pricing). and (4) a range of prices. Pricing takes creativity. bundles. competition and customers.

Enrollment No.: Pugazhendi (Moorthy) **** END OF ANSWER **** MBA Information Systems – Managerial Economics P a g e | 17 .