ACCA F5 Optimal pricing – tabular approach
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Is this tabular approach for optical pricing will be asked in the acca exam because I dont think this tabular approch will be asked in the exam and ,moreover I havent seen this type of quetsions in the past year question as well??
Of course it has been asked in the exam (and is in the syllabus), otherwise it would not be in our lectures 🙂
It has not been asked often, but you will find some questions on it in your Revision Kit.
Thank you for all your videos. I have a generale question ..Im just reading your note and watching your videos but Im worried if your notes are covering all chapter needed in exam? or I still need to read other books?
In future please ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture 🙂
The lectures and notes cover more than enough to be able to pass the exam well. You do not really need a Study Text.
But what you must buy is a Revision Kit from one of the ACCA approved publishers. They contain lots of exam standard questions to practice, and practice is vital to passing the exam.
Very valuable lecture, thank you sir.
One quick question, do we consider the computed elasticity as an absolute value?
No 🙂
Thank you sir for your hospitality towards giving us such a great lessons we couldn’t get anywhere else than Open tuition. We always appreciate the hard work you’re doing.
Here, i feel little bit confused and i’m looking your help sir.
How do I determine or know if the value we get for PED is indicating an elastic demand or an inelastic demand?
There is no ‘cut-off’ point. All you can say is that the great the PED then the more elastic, and the lower the Bed then the less elastic.
Hi Sir,
Here it is established that the cost pu decreases with increased production. We all know the Variable element of cost would remain same on most occasions, other things being constant, So is it the fixed cost element that decreases in the pu cost that inturn effects the decrease in the overall cost pu?
Certainly when we are using the price demand equations as in the next lecture (which is more common in the exam) we always assume that the variable cost stays constant.
However, it certainly could change for several reasons (e.g. discounts on material for larger quantities, the application of the learning rate to the labour) and if you do get asked a tabular question then you use whatever units costs are given in the question – the reason for them changing (or not changing) is not relevant.
Hi
Do you have any lectures on profit tables? If so where can i find it?
Profit tables are not a separate topic! They are needed in tabular pricing, and they are needed in devision making under uncertainty – there are lectures on both.
The lectures are a complete free course and cover everything needed to be able to pass the exam well.
Thank you so much sir, for the lectures. I have been preparing for exams with only your lectures and notes.
How do we determine if the value we get for PED is indicating an elastic demand or an inelastic demand? Is there anything like a scale such as if the value is above a specific amount- it is elastic, and if it is below- it is inelastic?
No – there is no sort of ‘limit’. All we can really say is that it is more or less elastic when comparing things.
ok thank you sir.
You are welcome 🙂
Thanks John. The presentation was straightforward with practical illustration. The interesting part is the effects on profit and MR and MC as selling price p.u. and cost p.u. changes.
According to the lecture notes, the optimal selling price is where MR = MC but this was not reflected in the table why? However, it was realistic enough to chose a selling price p.u. of $15 as this indicate a higher profit of $360.
But I explain this in the lecture. In a tabular question we assume that the only possible selling prices are those given in the question.
Acknowledged sir and thank you
You are welcome
plz help 🙁
if we want to see the same exact question and solve using MR=a-b2Q and assume mr=mc then whats the mc value ?
You could not be asked do it using formulae because the marginal cost keeps changing.
I really found the lecture was of help. BTW, sir, you are an adorable teacher to me, making the lessons so understandable. Truly appreciate your hard work. Many thanks.
Thank you very much for your comment 🙂
A low PED is better for the business to make high profit than higher PED?
because low PED means that the SP is increasing by one percentage and there is no change or the demand remains same. it is correct ?
A low PED certainly means that an increase in selling price will result in only a small decrease in the demand. So there is the possibility that increasing the selling price will result in more profit.
Therefore a lower PED is better than higher PED?
I think they both meant dropping the price from $16 to $13 which i am also getting 32
For elasticity you change the price by just one increment, otherwise it was be a rather meaningless exercise and just be playing with numbers for the fun of it.
Example 3, current selling price is $16 per unit
I tried dropping to $13 instead of 15.5, i notice the elasticity of demand is -20. Is my answer correct?
Yes – it is correct.
The elasticity is different at different price levels.
I made it 32 when dropping to $13, am I doing something wrong?
Actually I was wrong in my answer before (and you are wrong also) If you drop from 13.5 to 13, then the % change is 0.5/13.5 = 3.70%
The demand change from 600 to 700, so the % change = 100/600 = 16.67%
So the elasticity = 16.67/3.70 = 4.5%