It is called a “price point” because it is a specific point on a demand curve where revenue is maximized. There may be one or more price points on any particular set of curves depending on the circumstances.
Microeconomics 201.
That’s the technical answer….as to why it is used to just mean “price” – well, it is a way for marketing “experts” to seem more knowledgeable than the public. My take.
Oh, you wanted a serious answer. Well, I can’t agree with Donald Mamula’s answer – Any straight line demand curve has only one point where revenue (that is, price time quantity) is maximized, and that’s the midpoint of the demand curve. That pq is greater than any other pq along the curve.
However, few demand curves are linear. The “price point” is best illustrated by the “kinked demand” curve found in oligopoly markets. The market price is usually found at the kink, and that is because price elasticity of demand below that point is very low while price elasticity of demand higher than that point is very high. That is, if sellers try to raise their price above the kink the quantity they sell will fall a lot, while if they lower their price they will not sell much more. In either case, the revenue they receive will fall compared with the pq at the kink. Of course, proving the existence of a price point is difficult and is usually based on the experience of the merchant.
I don’t know which Econ class this is – when I taught Microeconomics, it was Econ 101. Macro was Econ 102.
Totally Unauthorized
Good point!
It is called a “price point” because it is a specific point on a demand curve where revenue is maximized. There may be one or more price points on any particular set of curves depending on the circumstances.
Microeconomics 201.
That’s the technical answer….as to why it is used to just mean “price” – well, it is a way for marketing “experts” to seem more knowledgeable than the public. My take.
Oh, you wanted a serious answer. Well, I can’t agree with Donald Mamula’s answer – Any straight line demand curve has only one point where revenue (that is, price time quantity) is maximized, and that’s the midpoint of the demand curve. That pq is greater than any other pq along the curve.
However, few demand curves are linear. The “price point” is best illustrated by the “kinked demand” curve found in oligopoly markets. The market price is usually found at the kink, and that is because price elasticity of demand below that point is very low while price elasticity of demand higher than that point is very high. That is, if sellers try to raise their price above the kink the quantity they sell will fall a lot, while if they lower their price they will not sell much more. In either case, the revenue they receive will fall compared with the pq at the kink. Of course, proving the existence of a price point is difficult and is usually based on the experience of the merchant.
I don’t know which Econ class this is – when I taught Microeconomics, it was Econ 101. Macro was Econ 102.