Transcript VBS Pricing
Virtual Business Sports Pricing The Main Product of a Sports Franchise is Seats(tickets) Pricing Conflict • A team would rather sell a seat for $1 than leave it empty • However, if all seats are sold for $1, the team will not make a profit • If prices are set too high there will not be enough demand • If prices are set too low profits will not be maximized Goods & Services are Supplied to Consumer Demand Laws of Supply & Demand • Law of Demand: The amount consumers are willing to buy varies with price. – Price Demand Price Demand • Law of Supply: The amount producers are willing to make varies with price. – Price Supply Price Supply • Law of Diminishing Marginal Utility: Consumers will only buy so much of a product even if the price is low. If price is too high a surplus will exist DEMAND Price Qty. SUPPLY Price Qty. $95 $80 2,000 3,000 $95 $80 5,000 4,400 $65 3,400 $65 3,400 $50 4,600 $50 2,000 $35 6,200 $35 1,000 Demanded Surplus Supplied Surplus: Supply exceeds demand Surplus If price is too low a shortage will exist DEMAND Price Qty. SUPPLY Price Qty. $95 $80 2,000 3,000 $95 $80 5,000 4,400 $65 3,400 $65 3,400 $50 4,600 $50 2,000 Demanded Supplied Shortage Shortage $35 6,200 $35 1,000 Shortage: Demand exceeds supply Equilibrium is the Goal of all businesses Equilibrium Price – Price in which supply and demand meet at the same price. Elasticity The degree to which demand is effected by changes in price Elastic vs. Inelastic • Elastic Demand – Changes in price greatly effect demand (luxuries) • Inelastic Demand – Changes in price does not seriously effect demand (necessities) • Sports & Entertainment products are elastic in nature. Factors that must be covered by Prices • All Costs & Expenses – Breakeven Point: Determining the point at which business expenses are covered and there is not a loss or profit. • Profit – Markup(margin): The amount of profit added to the breakeven point. Pricing Terms • Price: The amount of money you charge customers for one unit which should reflect what customers will pay. • Revenue: Money that is brought into the business, mostly through sales(unit sales x price). • Demand: Amt. Of goods or services customers are willing to buy at a given price • Yeild Management Pricing: Pricing strategy used whenever the quantity of a product is fixed(I.E. seats) to maximize profits by selling better tickets at higher prices or when demand increases.