DECA Marketing Cluster Practice Exam

Which pricing strategy aims to maximize sales by varying pricing?

1. Price Fixing

2. Price Discrimination

3. Cost-Plus Pricing

4. Penetration Pricing

The correct answer is: Price Discrimination

The correct choice here is price discrimination, which is a pricing strategy that allows businesses to maximize sales by charging different prices to different customers for the same product or service based on various factors such as customer demographics, purchase time, or purchase quantity. This approach is particularly effective in capturing consumer surplus, as it enables sellers to adjust prices according to the willingness to pay of different market segments, thereby increasing overall sales volume and revenue. For instance, a movie theater may charge lower prices for children or seniors while maintaining higher prices for adults, effectively increasing attendance and sales from those segments who are more price sensitive. In contrast, price fixing is an illegal practice where competitors agree to set prices at a certain level, which does not facilitate maximizing sales in a fair and competitive manner. Cost-plus pricing involves adding a standard markup to the cost of the product, which does not adapt to market demand or customer sensitivity and may not effectively maximize sales. Penetration pricing aims to enter a market by setting a low initial price to attract customers, but it does not involve varying prices throughout different customer segments.